Correction Program

[Guest segal]

Has anyone heard anything further about the likelihood of the IRS issuing a document failure correction program by the end of this year?

[Just Me]

Document Corrections Program for 409A May Be Released in Weeks, IRS Official Says

NEW YORK—A tax code Section 409A documentary corrections program could be issued as early as November, Internal Revenue Service Senior Counsel Stephen B. Tackney said Oct. 26. “I really couldn't tell you [when the program will be announced] other than it won't be in the next couple weeks … We're working as hard as we can and would like to get it out as soon as possible,” he told the American Bar Association's 24th annual National Institute on Compensation for Executives and Directors conference. The envisioned documentary corrections program would provide relief to taxpayers regarding Section 409A plan documentary failures and would function similarly to the operational failures corrections program, announced in Notice 2008-113, Tackney said. The program would instruct taxpayers how to self-correct Section 409A documentation mistakes, and associated costs for making those corrections likely will be part of the program, he said. Tackney said it was difficult to provide more precise information on when the guidance will be issued because of internal Treasury Department approval processes, but he did say taxpayers will be given adequate time to implement the program.

Operational Failures Corrections Program

Tackney discussed Notice 2008-113, which provides taxpayers with relief from paying additional taxes under Section 409A because of certain nonqualified deferred compensation plan operational failures. The guidance was constructed, in an attempt to ease administrative burden and promote straightforward program implementation, so entities could refer to one section of the guidance to obtain relief without having to analyze the entire notice, Tackney said. IRS aimed to achieve three chief goals in the guidance: to make corrections increasingly less costly the sooner problems are identified and fixed, to provide increasingly more flexibility in the program as the seniority of affected employees decreases, and to avoid making the cost of correcting small mistakes more expensive than the actual errors, he said. Tackney emphasized employers and employees should closely comply with the rules as explained in the notice, including all disclosure requirements. Comments received by IRS have questioned the need for the disclosures, but those disclosures are required to qualify for the relief, he said.

Disclosure Rules Cited

Employers need to attach information about their corrections to their returns and affected employees need to attach that same information to their own returns, Tackney said. More broadly, Tackney said the guidance has been generally well received. “Judging from the comments, or I guess the lack of comments on the operational aspects, it seems that other than people who don't like the disclosure part, it seems to be working,” he said. He also said taxpayers should not look to IRS for additional guidance on operational failures corrections. “I think we were pretty explicit that this was pretty much going to be it for operational failures,” he said.

[Guest segal]

Has anyone heard anything new on this correction program?

Document Corrections Program for 409A May Be Released in Weeks, IRS Official Says

NEW YORK—A tax code Section 409A documentary corrections program could be issued as early as November, Internal Revenue Service Senior Counsel Stephen B. Tackney said Oct. 26. “I really couldn't tell you [when the program will be announced] other than it won't be in the next couple weeks … We're working as hard as we can and would like to get it out as soon as possible,” he told the American Bar Association's 24th annual National Institute on Compensation for Executives and Directors conference. The envisioned documentary corrections program would provide relief to taxpayers regarding Section 409A plan documentary failures and would function similarly to the operational failures corrections program, announced in Notice 2008-113, Tackney said. The program would instruct taxpayers how to self-correct Section 409A documentation mistakes, and associated costs for making those corrections likely will be part of the program, he said. Tackney said it was difficult to provide more precise information on when the guidance will be issued because of internal Treasury Department approval processes, but he did say taxpayers will be given adequate time to implement the program.

Operational Failures Corrections Program

Tackney discussed Notice 2008-113, which provides taxpayers with relief from paying additional taxes under Section 409A because of certain nonqualified deferred compensation plan operational failures. The guidance was constructed, in an attempt to ease administrative burden and promote straightforward program implementation, so entities could refer to one section of the guidance to obtain relief without having to analyze the entire notice, Tackney said. IRS aimed to achieve three chief goals in the guidance: to make corrections increasingly less costly the sooner problems are identified and fixed, to provide increasingly more flexibility in the program as the seniority of affected employees decreases, and to avoid making the cost of correcting small mistakes more expensive than the actual errors, he said. Tackney emphasized employers and employees should closely comply with the rules as explained in the notice, including all disclosure requirements. Comments received by IRS have questioned the need for the disclosures, but those disclosures are required to qualify for the relief, he said.

Disclosure Rules Cited

Employers need to attach information about their corrections to their returns and affected employees need to attach that same information to their own returns, Tackney said. More broadly, Tackney said the guidance has been generally well received. “Judging from the comments, or I guess the lack of comments on the operational aspects, it seems that other than people who don't like the disclosure part, it seems to be working,” he said. He also said taxpayers should not look to IRS for additional guidance on operational failures corrections. “I think we were pretty explicit that this was pretty much going to be it for operational failures,” he said.