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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The IRS has issued guidance regarding withholding and reporting requirements under Code Sec. 409A, which was enacted by the American Jobs Creation Act of 2004 (P. L. 108-357). Code Sec. 409A provides that any amounts deferred under a nonqualified deferred compensation plan that are not subject to a substantial risk of forfeiture and have not previously been included in income are includible in gross income, unless certain requirements are met. In Notice 2005-94 (CCH Pension Plan Guide ¶17,132M), the IRS had waived the employers' and payors' reporting requirements for calendar year 2005 with respect to annual deferrals of compensation within the meaning of Code Sec. 409A. This new guidance applies to calendar years 2005 and 2006. It supersedes Notice 2005-94 and modifies Notice 2005-1 (CCH Pension Plan Guide ¶17,130K).
For calendar years 2005 and 2006, an employer is not required to report amounts deferred during the year under a nonqualified deferred compensation plan in box 12 of Form W-2 using Code Y. Likewise, a payor is not required to include such amounts in box 15a of Form 1099-MISC.
For 2006, an employer must treat amounts includible in gross income as wages under Code Sec. 409A as wages for income tax withholding purposes. These amounts must be reported on line 2 of Form 941 and box 1 of Form W-2. For nonemployees, a payor must report such includible amounts as nonemployee compensation in box 7 of Form 1099-MISC and such amounts in box 15b of Form 1099-MISC. The IRS has provided interim guidance on the calculation of the includible amount. The includible and reportable amounts equal the portion of the total amount deferred under the plan that, as of December 31, 2006, is not subject to forfeiture as defined in Notice 2005-1, or in the proposed 409A regulations (CCH Pension Plan Guide ¶20,261T), and has not been included in income in a previous year, plus any amounts of deferred compensation paid or made available to the service provider during 2006. Employers or payors may treat amounts as previously included in income if they properly reported the amounts on 2005 Form W-2, or Form 1099-MISC.
The IRS also provides guidance for calculating the total amount deferred under the plan as of December 31, 2006, for purposes of determining the amount required to be in included in gross income for: (1) account balance plans, (2) nonaccount balance plans, (3) amounts deferred under stock rights, and (4) other deferred amounts. For other deferred amounts, such amounts are determined under a reasonable, good faith application method.
Employers and payors, including those who relied on Notice 2005-94 for calendar year 2005, are required to file an original or corrected information return and furnish an original or corrected payee statement for 2005, reporting any previously unreported amounts includible in gross income for calendar year 2005, as determined under the new guidance for calendar year 2006. Failure to comply may result in penalties. Generally, the original or corrected returns must be filed by February 28, 2007, and the original or corrected payee statement must be filed by January 31, 2007.
Guidance is also provided with regard to assets set aside in a trust for purposes of paying deferred compensation. Where amounts have been transferred to a trust under an arrangement that triggers the income inclusion and additional taxes and the transfer is not eligible for the relief pursuant to Notice 2006-33 (CCH Pension Plan Guide ¶17,133K), employers and payors must use a reasonable and good faith method to determine the amount includible in income for purposes of reporting.
Finally, guidance is provided to service providers for income tax reporting and tax payment requirements for 2005 and 2006 for deferrals of compensation that are included in gross income. Among other requirements, a service provider must report as income and pay any taxes due relating to amounts includible in gross income for 2006. In addition, if a service provider has not reported as income and paid any tax due relating to amounts includible in 2005, calculated in accordance with the new guidance, the service provider must file an amended return and pay any related taxes.
Comments on the interim guidance should be submitted by March 18, 2007 to the Internal Revenue Service, CC:PA:LPD:RU (Notice 2006-100), Room 5203, PO Box 7604, Ben Franklin Station, Washington, DC 20044 or electronically at: notice.comments@irscounsel.treas.gov.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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