Bonus liability timing under updated revenue procedures

Plain-English summary

Chief Counsel addressed the timing of a taxpayer’s liability for bonus compensation under Rev. Proc. 2008-52, as modified by Rev. Proc. 2009-39. When an employee must still be employed at year-end to receive the bonus and the bonus is paid within two and one-half months after the taxable year ends, the taxpayer incurs the liability in the year of payment. The advice also notes that Rev. Proc. 2009-39 allows an automatic change request for this situation.

Ruling snapshot

• Question: In which year does a taxpayer incur liability for a bonus payable only to an employee still employed at year-end?
• Outcome: Advice given
• Key authorities: IRC § 461; Rev. Proc. 2008-52; Rev. Proc. 2009-39

Full text (IRS public release)

ID: CCA-915212-10 Number: 201043039
Release Date: 10/29/2010
Office: ----------------
UILC: 461.01-00

From: ----------------------
Sent: Wednesday, September 15, 2010 2:12PM
To: ---------------------
Cc: -----------------------------
Subject: RProc 2008-52 -- 133- bonus compensation

Hi,

Rev. Proc. 2008-52 has be amplified, modified, and clarified by Rev. Proc. 2009-39. Section 2.20 of Rev. Proc. 2009-39 allows the taxpayer to make an automatic change request for the situation where the employee has to be employed at the end of the year to receive the bonus and the bonus is paid with in 2 1/2 month of the taxable year end. Since the employee has to be employed at the end of year, the taxpayer would incur the liability for the bonus in the year of payment.

I hope this answer your question.