Increased IRS scrutiny of executive compensation and common errors under Code sections 409A and 162(m)

HRS Insight
Executive compensation has come under increasing scrutiny in the media, by institutional shareholder groups, regulatory agencies, such as the IRS and SEC, and Congress with the enactment of legislation impacting executive pay practices, including the Dodd–Frank Wall Street Reform and Consumer Protection Act. In this climate of increased transparency and disclosure, the IRS has stepped up its audit activity with respect to taxpayers' compliance with the requirements for nonqualified deferred compensation arrangements under Code Section 409A, as well as the $1 million annual deduction limitation on certain compensation paid to "covered employees" of publicly-held corporations under Section 162(m).

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