On December 10, 2008, the IRS issued Notice 2008-115, which provides that tax reporting for 2008 will not be required for deferrals of compensation under nonqualified deferred compensation arrangements that comply with § 409A of the Internal Revenue Code. The Notice also provides guidance to employers and taxpayers regarding reporting and amounts includable in income in the case of non-compliant deferred compensation subject to § 409A.
In Notice 2005-1, the IRS said that deferrals of income under a nonqualified deferred compensation plan subject to Section 409A would be reported in Box 12 of Form W-2 using Code Y and Box 15a of Form 1099-MISC. In later guidance, the IRS delayed the implementation of the reporting requirement for 2006 and 2007. Notice 2008-115 provides that no reporting will be required for 2008 or later years until further notice. The IRS said it does not anticipate that reporting will be required until the calendar year following the year final regulations on amounts includible in income are issued. This suggests that reporting will not be required for deferrals made in 2009 because that is the earliest year the regulations—which were just recently proposed—could be finalized.
The Notice provides additional guidance to employer and taxpayers regarding deferred compensation arrangements that are subject to § 409A but that fail to comply with § 409A. The Notice provides interim rules for determining the amounts to be included in income, the calculation of the additional 20% tax, and tax reporting. The Notice indicates that taxpayers can also rely on the recently proposed regulations noted above in determining the amounts included in income, provided that the taxpayer applies the proposed regulations for all purposes.