On December 4, 2009, the IRS released CCA 200949040. This release reminds taxpayers that bonus payments to be paid in the following year (for services performed in the current year) may not be deducted if the payment of the bonus is contingent on the employee being employed on the date of the bonus payment. In this case, the contingency (being employed on the date of payment) means that the bonus plan is not a fixed liability in the current year. Because it will not pass the "all events test," the bonus is not deductible in the current year.
In order to deduct the bonus payments in the current year, taxpayers may want to amend their bonus plans to require that recipients be employed on December 31, 2009 (instead of the date of the bonus payment). To change the treatment of the bonus payment, this amendment must be made by December 31, 2009.
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