New IRS CCA Discusses FICA Taxation Of Dividend Equivalents

Date: April 17, 2014

In IRS Chief Counsel Advice (CCA) 201414018 (released publicly on April 4, 2014), dividend equivalents paid currently that are attributable to deferred restricted stock units (RSUs) were said to be subject to FICA taxation when paid and not treated as earnings related to the RSUs that are exempt from FICA taxation. An analogous question is whether deferred dividend equivalents paid at the same time and form as deferred RSUs should also be subject to FICA taxation as such amounts are credited during the deferral period or, alternatively, be treated as earnings exempt from FICA taxation.

Consideration should still be given to treating dividend equivalents that are deferred, accumulated, and paid with respect to related RSUs differently, as earnings that are exempt from FICA taxation. In determining the FICA taxation of deferred dividend equivalents, taxpayers should not accept the conclusion of the recent CCA without further analysis.

Click here to view the PDF.

For More Information

For more information, please contact:

Francesco A. Ferrante
Phone: 937.443.6740
Mobile: 937.470.0598

This article may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.
This document may be considered attorney advertising in some jurisdictions.