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  • Casual Articles - Protecting the Tax Advantage of Your Deferred Compensation

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    , independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

    An opt

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    The American Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.

    Given the potentially huge tax consequences for non-compliance with the rules, you should consult with your organization’s benefit specialist and your tax professionals to figure how your compensation might be affected by these new rules.

    Deferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

    An opti

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    ance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.

    Given the potentially huge tax consequences for non-compliance with the rules, you should consult with your organization’s benefit specialist and your tax professionals to figure how your compensation might be affected by these new rules.

    Deferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

    An opt

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    ith the rules, you should consult with your organization’s benefit specialist and your tax professionals to figure how your compensation might be affected by these new rules.

    Deferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

    An opt

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    ferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

    An opt

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    , independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.

    An option for independent corporate directors and individual board members who receive 1099 income for their services may consider is to freeze their nonqualified plan and adopt a qualified plan such as the “one person defined benefit plan”, called the Solo-DB Plan. Qualified retirement plans are exempt from the requirements of the American Jobs Creation Act.

    The Solo-DB plan allows the highest deductible contributions possible in a qualified retirement plan. For example in 2005 one can contribute up to $170,000 of compensation into a tax-deferred Solo-DB plan.

    Defined benefits plans have been around for a long time. But, recent pension legislation has raised the contribution and deductibility limits as well as sim

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