REPRESENTATIVE TRANSACTIONS

Print Page

An IRC Section 409A success. Client was a key employee at a well-known Bostonbased tech company. Upon his separation of service, he negotiated a significant separation payment. The employer argued that the separation payment would be subject to a 20% Section 409A penalty, which it was required to withhold. We argued that the penalty was not applicable to the payment as structured. Nevertheless, the employer, which was concerned about being hit with its own penalties for failing to withhold the Section 409A penalty if withholding was in fact required, insisted upon withholding. We negotiated a settlement whereby employer would withhold the 20% penalty from the separation payment made to client, but would reimburse client for half of the penalty. We advised client to file a claim for refund for the entire penalty. Last week, the refund was allowed and the client received a check for $75,000.