Companies required to use “box 11” of Form W-2 in 2023 to report either payments of nonqualified deferred compensation (deferred compensation) or FICA taxation of unpaid deferred compensation may soon be challenged by employees angry about potential double taxation of deferred compensation. This double tax is created because the Form 1040 filing instructions for 2023 require deferred compensation payments reported in box 11 of Form W-2 to be reported on an employee’s Form 1040 as “wage” income subject to income tax and again as “additional income,” also subject to income tax.
ML BeneBits
EXAMINING A RANGE OF EMPLOYEE BENEFITS
AND EXECUTIVE COMPENSATION ISSUES
AND EXECUTIVE COMPENSATION ISSUES
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As the Code Section 139 relief period is scheduled to end soon along with the end of the COVID-19 national emergency, employers that assisted employees with personal expenses attributable to the COVID-19 pandemic should consider taking certain steps before the period ends.
The Biden administration intends to end the national emergency and public health emergency declarations (Emergency Declarations) attributable to the COVID-19 pandemic on May 11, 2023. The COVID-19 pandemic brought multiple temporary changes for ERISA-governed group health and welfare plans that will sunset at the conclusion of the Emergency Declarations. It remains to be seen what, if any, guidance will come from the regulatory agencies outlining how these mandates will be phased out or, potentially, if any continuing obligations will remain.
The Federal Trade Commission (FTC) announced a notice of proposed rulemaking on January 5, 2023, that would ban employers from entering into or maintaining noncompete clauses with their workers. The proposal was issued in response to President Joseph Biden’s July 9, 2021 executive order and related statements calling on the FTC to ban or limit employment contract restrictive covenants that restrict workers’ freedom to change jobs. See our LawFlashes discussing the proposal and frequently asked questions.
Recent LawFlashes from the employee benefits practice include IRS FAQs: A Potential Shield for Taxpayers—Not a Sword for the Service, A Survival Guide to DOL Group Health Plan Mental Health Parity Audits, and ERISA Fiduciaries: DOL Proposed Rule Signals More Ease for ESG Investing.
For the 2020 tax year, the Internal Revenue Service (IRS) moved reporting of certain nonemployee compensation, including current and deferred compensation paid to independent contractors and corporate directors, from Form 1099-MISC to revived Form 1099-NEC (see our previous LawFlash). However, according to IRS Publication 1220, released on October 20, 2020,