409A

gjcaldwell — Thu, 15 Jul 2021 17:02:06 GMT

I have a 409A . It provides a lump sum distrbution that I am committed to not changing. The separation of sevrice date is 12/31/2021. The distribution will actually take place in 2022. Two questions:

1. To which tax year, 2021 or 2022, is the distribution subject to?

2. Is the plan trustee required to withhold taxes at distribution or may I pay them when I file in April for the subject tax year?

Re: 409A

TaxT2021 — Thu, 15 Jul 2021 18:13:50 GMT

Hi G Caldwell

I hope this day finds you exhilarated and well.

To clarify:

You have deferred compensation
The compensation is deferred under a Nonqualified Deferred Compensation Plan (409A)
You will be exiting the company on 12/31/2021
are taxes applicable in 2021 or in 2022 when distribution is made?

Here are the key guidelines for income inclusion:

Per The US Code (409A)
- Distributions are includable in income at the time of distribution if
  - Your distributions cannot occur until
    - Separation from service (6 mos after separation if a key employee)
  - Your plan does not permit acceleration of payments
  - You have elected to defer compensation

These are the prime consideration barring any exceptions.

In conclusion, distributions are included in taxable income in 2022.

As far as tax withholdings, read the plan document.
If taxes are not withheld, depending on your tax circumstance, you may have to remit any tax due with your personal tax returns

I recommend that you speak with a TurboTax or Mint professional, for a further analysis you particular situation.

Glad to you participated in this forum.

All the best!

topic Re: 409A in Retirement tax questions

409A

Re: 409A