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20 Percent Additional Tax Applies to Retention Bonus

May.12.2015 — Law360

Jennifer Ray, a Washington, D.C. based partner in Crowell & Moring's Tax Group, discusses the implications of the Internal Revenue Service's recently issued Chief Counsel Advice (CCA) stating that an executive's retention agreement violated Code section 409A[2] and therefore was subject to an additional 20 percent federal income tax. Ray notes that the CCA is "a cautionary tale for companies playing the ‘audit lottery.'"

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