Chris Rylands and Corey Slagle with Bryan Cave have just posted about common misconceptions about Internal Revenue Code 409A on BenefitsBryanCave.com. Section 409A frequently impacts bank’s abilities to compensate their directors and officers in either a deferred manner or upon a change in control.
Every 409A attorney knows the look. It’s a look that is dripping with the 409A attorney’s constant companion – incredulity. “Surely,” the client says, “IRS doesn’t care about [insert one of the myriad 409A issues that the IRS actually, for some esoteric reason, cares about].” In many ways, the job of the 409A attorney is that of knowing confidant – “I know! Isn’t it crazy! I can’t fathom why the IRS cares. But they do.”
There are a lot of misconceptions out there about how this section of the tax code works and to whom it applies. While we cannot possibly address every misconception, below is a list of the more common ones we encounter.