Harrison Richards, associate in Baker McKenzie’s Tax Practice, has published a Tax Notes article examining the application of FICA taxes to nonqualified deferred compensation arrangements. The article examines the issue through the lens of the annual “Bobby Bonilla Day,” a widely recognized example of deferred compensation in practice.
In the article, Harrison examines the distinction between the general and special timing rules under section 3121(v)(2), highlighting how proper application of the special timing rule can allow deferred compensation to be subject to FICA taxes at vesting or performance and prevent deferred compensation and related earnings from being subject to FICA taxes at payment. He also outlines the consequences of noncompliance, which can result in increased tax exposure, and practical methods for correcting FICA underpayments, including the use of the rule of administrative convenience and the lag method to extend the time to correct these underpayments.
Subscribers can read the article here:
Bobby Bonilla Day and FICA: Underpayments of Tax on Deferred Compensation | Tax Notes
