Constructive receipt of Wages and Short Term Deferred Compensation
I am the controller of a company that pays our salespeople on commission. Commissions are tracked in an account by employee as they are earned, and then drawn against for their pay. Once the commission is posted to their account, it is available for them to request payment of. Salespeople may leave balances in their account from month to month to cover their salary during the slow times.
If it the fiscal year end of the company, 12/31, may the salesperson leave a balance in their account without getting the penalty tax related to the constructive receipt doctrine? Does the tax section 409A related to deferred compensation (more specifically the section as it refers to the short term deferred compensation) override the constructive receipt doctrine? In other words, may the salesperson choose to leave a balance in their commission account at the end of the year and not get taxed on it, as long as they draw the entire amount by March 15?