IRS Examining Executive Compensation Packages
It has emerged that the US Internal Revenue Service (IRS) is conducting an
audit program in order to ensure that firms are adhering to tax law with regard
to executive compensation packages. Although initially just 24 companies are being audited for the purposes of
this investigation, the probe is likely to be extended to many other companies
in the United States, with clarifications and guidance regarding the tax code
to follow if necessary. According to the IRS, several areas of executive compensation will come under
increased scrutiny, including stock options, fringe benefits, retirement contracts,
and deferred compensation plans. Rules which cap deductible compensation at $1 million, employee leasing schemes,
and life insurance are all also likely to be studied by the tax authority. Explaining the reasoning behind the drive, IRS Commissioner, Mark Everson announced
that: "Executive pay packages have become much more complex. We're taking a
close look at these vehicles to make sure they fully comply with the law." .
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