Additional Relief Under Sec. 409A Document Failure Correction Program

By Alistair M. Nevius, J.D.

From the IRS

On November 30, the IRS issued further relief for nonqualified deferred compensation (NQDC) plans covered by Sec. 409A (Notice 2010-80). The notice expands the types of plans eligible for relief under Notice 2010-6, which was issued in January 2010. It also provides an additional method of correction and transition relief under Notice 2010-6 for certain plan document failures relating to payments at separation from service, and it modifies the correction reporting requirements in Notices 2008-113 and 2010-6.

Notice 2010-6 provided methods for taxpayers to voluntarily correct certain types of failures to comply with the document requirements of Sec. 409A. (For more on Notice 2010-6, see Walker and Jones, “Notice 2010-6: Sec. 409A Document Failure Correction Program,” 41 The Tax Adviser 166 (March 2010).) Notice 2010-80 clarifies that the types of plans eligible for relief under Notice 2010-6 include a nonqualified plan linked to a qualified plan or another nonqualified plan, provided that the linkage does not affect the time and form of payments under the plans.

Notice 2010-80 also expands the types of plans eligible for relief under Notice 2010-6 to include certain stock rights that were intended to comply with the requirements of Sec. 409A.

The notice provides an additional correction method for certain failures involving payments at separation from service subject to the requirement to submit a release of claims or similar document. It also provides transition relief permitting the correction of such failures that were in effect on or before December 31, 2010 (including relief from the service provider information reporting requirements).

The notice provides relief from the Notice 2010-6 service provider information reporting requirements for corrections made under the transition relief ending December 31, 2010.

The notice also provides relief from the Notice 2008-113 requirement that service recipients provide certain information to service providers for corrections made in the same tax year the failure occurs.

The Notice 2010-80 modifications to Notice 2010-6 are effective for tax years beginning on or after January 1, 2009. The Notice 2010-80 modifications to Notice 2008-113 are effective for tax years beginning on or after January 1, 2010.

Newsletter Articles

AWARD

James M. Greenwell Wins 2014 Best Article Award

The winner of The Tax Adviser’s 2014 Best Article Award is James M. Greenwell, CPA, MST, a senior tax specialist–partnerships with Phillips 66 in Bartlesville, Okla., for his article, “Partnership Capital Account Revaluations: An In-Depth Look at Sec. 704(c) Allocations.”

 

FEATURE

How Legal Marijuana Businesses Are Treated Federally

This article examines the tax problems that these businesses face and warns that professionals may provide services to them at their peril.