Originally Published MX July/August 2004
BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT
Areas of Scrutiny|
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In its audit program, the IRS is looking at eight specific areas of executive compensation.
- Nonqualified deferred compensation. Employment and withholding taxes must be applied properly, and income reported at the proper time.
- Stock-based compensation. Shareholder approval must first be obtained, and the proper amount of income must be recognized at the proper time.
- Deductibility of compensation in excess of $1 million for officers of public companies. Proper procedures must be in place in order to allow the deduction.
- Golden-parachute arrangements. New regulations must be followed.
- Split-dollar life insurance. New regulations must be followed. Also, the elimination of many of these programs due to the Sarbanes-Oxley Act's prohibition on corporate loans to executives must be treated properly.
- Family-limited partnerships. Transfers of stock options to these entities must be properly disclosed.
- Offshore employee leasing arrangements. The transactions must be properly disclosed.
- Fringe benefits. Proper amounts of income must be included on the executive's W-2 form, particularly in the areas of personal use of company aircraft, company-provided automobiles, and relocation expenses.
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