"If you do start drawing your pension, you can change your mind and defer
it instead, but you can only do this once.
(10) Alison Bennett, Jordan Betz & Alison Carpenter, KPMG Settles With Justice Department In Move To Defer
Tax Prosecution, DAILY TAX REPORT (Aug.
Any executive who takes full advantage of the opportunity to defer
$9,500 through a tax-deferred annuity will be unable to defer
any additional compensation under a 457(b) plan.
The only explicit statutory opportunity to resolve these issues is in the context of the offshore trust funding provisions, if either substantially all the benefited services are foreign or the situation is ultimately determined in regulations not to "improperly" defer
409A provides that, after the first election to defer
distribution, a service provider can make an additional election for a further deferral, if the plan requires that:
The selling shareholders then are able to defer
their sold stocks' gain by the installment note over several years, rather than recognizing all of their gain in the year of sale.
Section 409A provides a special deferral election rule for compensation that is "performance-based." Under this rule, the initial election to defer
performance-based compensation, based on services performed over a period of at least 12 months, must be made at least 6 months before the end of the service period.
Bad Debt Cancellation: Cancellation of debt generally results in taxable income to the debtor to the extent that the amount settled for exceeds the outstanding debt balance.
* Compensation may only be deferred if the election to defer
was made in the previous tax year.
Year-End Bonuses: Accrual basis C-corporations can deduct a current year bonus not actually paid to an employee if: (a) the employee does not own more than 50% in value of the corporation's stock, (b) the bonus is properly accrued on its books before the end of the current tax year, and (c) the bonus is actually paid within the first 2 1/2 months of 2002.
IRS-approved plans, such as individual retirement accounts (IRAs), Keogh small-business plans and 401(k) employee plans, let you sock away pre-tax dollars and defer
taxes on the investment income until you take the money out, usually after reaching age 59 1/2.
* A plan is deemed to defer
an item of compensation if the service provider has a legally binding right to the funds, but the compensation is payable in a subsequent tax year.
EDC plans allow top management to defer
income tax on current compensation, including bonuses.
One way is to defer
your year-end bonus until early next year.
The FASB recently has considered re-examining certain provisions included in Statement 96 "Accounting for Income Taxes." The board agreed to issue an exposure draft that would defer
the effective date of Statement 96 for an additional nine months.