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Specified employee 6 month delay and income taxes


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It is my understanding if a specified employee's deferred compensation is subject to a 6 month delay, income tax is due at the end of the 6 months when the deferred compensation is paid. Is this correct? I have an employee saying otherwise.

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Your question is not clear, are you asking when does the deferred compensation become taxable and subject to income tax withholding rules or when the actual tax on the income is due? If it's the former, the income is taxable as compensation when it is paid or otherwise made available to the recipient, which is the 6 month delay date, and subject to withholding at that time. If it's the latter, the tax is due on the recipient's tax return due date as the amount is contingent upon the person's total tax situation.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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