IRS discussed FICA timing and a possible statute-of-limitations issue

Number

201025055

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Nonqualified Deferred Compensation Plans

Topics

Employment taxes

Code sections

§ 3121

Ruling dated

May 24, 2010

Publicly released

June 25, 2010

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2010, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

The IRS advised that FICA is due upon distribution when amounts were not properly taken into account upon deferral under IRC § 3121(v)(2). The memo noted a risk that the Service may discover a failure to pay the required FICA. It also discussed, without resolving, whether the statute of limitations could be waived when a taxpayer relied on incorrect advice from a payroll company.

Ruling snapshot

Question: When is FICA due if deferred compensation was not properly taken into account at deferral, and may the limitations period be waived based on payroll advice?
Outcome: Advice given
Key authorities: IRC § 3121(v)(2); applicable FICA regulations.

Full text (IRS public release)

ID: CCA_2010052410185932 Number: 201025055
Release Date: 6/25/2010
Office: -----------------------------
UILC: 3121.16-02

From: --------------------
Sent: Monday, May 24, 2010 10:19:14 AM
To: ------------------
Cc: ---------------------
Subject: RE: Voluntary Disclosure ---------

I suppose that is always a risk with the nonduplication rule. The taxpayer should know that, under our regs, FICA is due upon distribution if the amounts were not properly taken into account upon deferral under section 3121(v)(2). There will always be a question of whether the Service will discover it if the taxpayer fails to pay the required FICA upon distribution. Our tax system is based on voluntary compliance.

I sense that you are sympathetic to the taxpayer's argument that they relied on the bad advice they got from their payroll company. On the more general issue of whether it is appropriate or acceptable (or common?) for us to waive the statute of limitations based on this type of excuse, I have to admit that I just don't know. ---------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------.

What does the Code say today, for your facts?

This advice was written for IRS staff and cannot be cited. Ezel checks the current Internal Revenue Code and IRS guidance against your situation, with citations.

Opens in Ezel Pro.

Checks the law as it stands today, not only this page
Cites every source it relies on, so you can verify it
Chat, drafting and research in one workspace