The IRS continues to focus on issues related to constructive receipt of income in its audits, especially for public-sector employers.
Generally, a choice for employees between taxable (e.g., cash), nontaxable (e.g., health insurance) and/or tax-deferred (e.g., retirement plan contributions) benefits results in immediate taxation, even if the nontaxable or tax-deferred benefits are chosen, unless an Internal Revenue Code exemption applies.
Best Best & Krieger LLP (BBK) helps clients navigate and comply with the complex rules that apply to the taxation of income so that clients can overcome challenges in structuring employee benefits, elections, and options to avoid adverse tax consequences. We assist clients in designing tax-compliant employee options, including those that cash out accrued leave and/or defer accrued leave to a deferred compensation plan.
BBK attorneys work closely with employers to review current policies and memoranda of understanding, assist in revising necessary documentation, and advise on the structure and administration of all policies that might implicate the constructive receipt doctrine.