The Internal Revenue Service is taking steps to ensure compliance with employment and income tax requirements relating to executive compensation. These steps are part of IRS's goal to improve tax compliance by corporations and high income taxpayers.
Executive compensation has evolved dramatically in recent years, in creativity, complexity, and dollar value. Stock options, deferred compensation, fringe benefits, and other "non-cash" alternative forms of compensation are becoming increasingly popular and making up larger and larger parts of executives' overall compensation packages.
There are multi-faceted tax implications for all forms of executive compensation: income and employment tax issues for the employers who pay the compensation and the executive employees who receive it. In addition to the increasing use of non-cash compensation, the use of partnerships and trusts (both domestic and offshore) in the handling of compensation is increasing. These factors add considerable complexity in determining current and future year tax liabilities for executives and their employers.
Following are audit technique guides (ATGs) that agents use during the course of corporation and/or executive employee tax examinations.