The Internal Revenue Service (IRS) announced in September 2009 that it would conduct random payroll tax audits of 6,000 companies. The audits will include a focus on compliance issues relating to Section 409A of the Internal Revenue Code of 1986. The IRS enacted Section 409A in 2004 to reform nonqualified deferred compensation that is earned during a taxable year but might be payable in a later taxable year.
“It’s not clear when the audits will start, but they will be ongoing over three years,” says Scott Landau, a partner at Pillsbury Winthrop Shaw Pittman. “The pressure on the IRS to collect taxes that have previously fallen between the cracks as well as the current focus on executive compensation by Congress, the Treasury Department, the Securities and Exchange Commission, and the press has put the spotlight on employee-related tax issues.”
