Section 409A Resource Kit

Summary

This resource kit provides guidance on nonqualified deferred compensation rules under Section 409A of the Internal Revenue Code. Section 409A governs almost every aspect of nonqualified deferred compensation, which is generally defined as any legally binding compensation where payment is or can be made in a taxable year after the taxable year in which the arrangement is created. Failure to comply with Section 409A is costly because noncompliant deferred amounts will be treated as having been paid to the executive (or other service provider) and subject to tax in the year of the compliance failure—resulting in liability for regular taxes and accrued interest as well as an additional 20% penalty tax.