International work assignments — both inbound and outbound, short-term and long-term — have become more common as the world gets “smaller” and “flatter.”While on foreign soil, most employees feel that they deserve additional compensation and that they should be at least somewhat released from the growing number of domestic tax rules that restrict compensation packages. Some of the more irksome rules restricting compensation arrangements lately are contained in the final regs under Code Sec. 409A on nonqualified deferred compensation.
While businesses breathed a collective sigh of relief at the end of last year when the deadline for overall compliance with the new nonqualified deferred-comp rules was extended, the new deadline — Dec. 31, 2008 — again looms. While the employee pays the price of realizing additional income should 409A trigger acceleration of any deferrals (and a 20 percent penalty), the employer frequently must ultimately pick up the tab under hold-harmless agreements. Addressing Code Sec. 409A compliance strategies for inbound and outbound workers is one of the tasks that need prompt assessment and action as year-end 2008 gets closer.
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