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In an apparent follow-up to its General Legal Advice Memorandum dated May 18, 2020 (GLAM 2020-004), the IRS has issued an internal procedural update that (1) extends the application of the administrative waiver of late employment tax deposit penalties for stock options to stock-settled restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) and (2) shortens the waiver’s deposit period by one day to align with current SEC securities open-market transaction settlement rules. The internal…

The IRS has issued a General Legal Advice Memorandum (GLAM 2020-004) that could increase the audit risk and exposure for late deposit penalties for companies granting stock-settled restricted stock units (“RSUs”) and either (i) not making their next-day employment tax withholding deposits with the IRS within one day of when they request their transfer agent to transfer shares underlying the RSU award to the employee or (ii) not treating the fair market value of the…

Now that we have had a couple of weeks to digest the IRS’s guidance in Notice 2018-68 on the Tax Cuts and Jobs Act’s (TCJA’s) amendments to Code Section 162(m), it’s a good time to take a closer look at the “grandfathering” rule. As a reminder, the TCJA (i) eliminated the “performance-based compensation” exception to Section 162(m)’s $1 million limit on the deductibility of covered employee compensation, (ii) expanded and made permanent the group of…

In a Private Letter Ruling released on August 17, 2018 (PLR 201833012) (“Ruling”), the IRS approved an employer’s proposed amendment to its 401(k) plan (“Plan”), under which it would make an employer non-elective contribution on behalf of an employee conditioned on the employee making student loan repayments (“SLR non-elective contribution”). As described in the Ruling, the proposed student loan repayment benefit program (the “program”), is a voluntary program under which the employee must elect to…

Last week, the IRS issued Notice 2018-68 containing initial guidance on the amendments to section 162(m) made by the Tax Cuts and Jobs Act (“TCJA”), including the transitional relief for written binding contracts. On balance, the guidance is not particularly favorable to taxpayers, as it takes a narrow view of the grandfathering relief for arrangements in effect under prior law, particularly for arrangements with negative discretion, and a broad view of the new group of…

Almost all plan documents contain some level of administrative provisions outlining how the plan is intended to operate (e.g., number of committee members, quorum, etc.).  Plan sponsors often view these provisions as “boilerplate” with little or no meaning.  In actuality, these are substantive provisions of the plan and failure to follow those provisions can have substantial consequences. The Consequences Failure to follow the terms of the plan document is a potential qualification issue under IRS…

As part of the tax reform process, Congress proposed several changes to qualified retirement plans that were cut from the final bill. One of these proposals, making changes to the rules governing 401(k) hardship distributions, found a new home in the Bipartisan Budget Act of 2018, signed by the President on February 9, 2018 (the “Act”).  The Act also made qualified retirement plan changes which provide additional relief to employees impacted by the California wildfires…

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law bringing significant changes to US tax law. One provision of the Act may further incentivize individuals to work as independent contractors instead of as traditional employees. The new provision allows for independent contractors, and for service providers structured as a partnership or other flow-through entities, the potential to deduct up to 20% of their revenue from their taxable income. And while…

On January 11, 2018, the IRS issued Notice 1036, which provides the percentage method tables for income tax withholding in 2018. Key developments include: The flat withholding rate on supplemental wages, such as equity awards, of $1 million dollars and under a year is now 22% – down from 25%. As anticipated, the mandatory supplemental withholding rate for compensation in excess of $1 million is now 37% – down from 39.6%. The backup withholding rate…