Daily Tax Update - June 21, 2016: IRS Issues Proposed Rules on Deferred Compensation Plans

IRS Issues Proposed Rules on Deferred Compensation Plans:  Today, the IRS issued proposed rules on section 409A nonqualified deferred compensation plans (REG-123854-12) and section 457 state and local government deferred compensation plans (REG-147196-07).  The proposed rules for nonqualified deferred compensation plans “clarify or modify” final rules issued under the same section.  The IRS also withdrew a specific provision from proposed rules issued in 2008 that dealt with calculating amounts includible in income under section 409A and will propose a revised version of the provision.

The proposed rules for state and local government deferred compensation plans set out how to determine when amounts deferred under these plans are includible in income and the amounts that should be included.

Treasury Inspector General Calls for Increased Enforcement Under IRS’s Offshore Voluntary Disclosure Program:  In a report issued today, the Treasury Inspector General for Tax Administration (TIGTA) blamed “internal control weaknesses” for delayed or incorrect processing of Offshore Voluntary Disclosure Program requests.  This program allows taxpayers to report offshore accounts in exchange for a set penalty.  TIGTA reviewed a sample of 100 taxpayers that were denied or had withdrawn from the program, and found that the IRS did not enforce penalties against 29 of these taxpayers, missing out on $21.6 million in penalties.