Tagged: FICA

The Special Timing Rule for Taxation of Nonqualified Deferred Compensation

For an employee who is a U.S. taxpayer, both the employer and the employee are liable for a portion of Social Security taxes and Medicare taxes (collectively referred to as “FICA” taxes) on the employee’s compensation. Employers are liable for withholding and remitting both the employer and the employee portions of FICA taxes, which typically occurs at the time the compensation is received by the employee, which his known as the “General Timing Rule.” However, when dealing with awards of nonqualified deferred compensation (“NQDC”) to U.S. taxpayers, a Special Timing Rule (outlined in Treas. Reg. §31.3121(v)(2)-1) may apply.  Under the Special Timing Rule, FICA taxes are owed when the employee becomes vested in...

Common U.S. Tax Withholding and Reporting Errors with Respect to Certain RSUs

A Canadian company (the employer) historically has not issued equity-based awards to employees of its U.S. subsidiaries, but it now is considering doing so. Past posts have addressed potential U.S. income tax pitfalls and the need for careful review of the plan and award agreements prior to the grant of restricted stock units (RSUs) and deferred share units (DSUs) to individuals who are subject to U.S. federal income tax on compensatory income. You can read the DSU blog entry here and the RSU blog entry here. Let’s assume careful review and drafting have addressed potential U.S. tax issues in terms of the written documents. What are common mistakes that can arise in administering...