Which of the Following Statements Is Incorrect Regarding Unfunded Deferred

question 898

Multiple Choice

Which of the following statements is incorrect regarding unfunded deferred compensation plans?

• A) An accrual- basis employer can deduct the compensation amount when it is accrued in the year of service.
• B) An employee is taxed when the amount is actually paid or made available.
• C) A 20% excise tax will apply if the employee can voluntarily elect to receive payment early.
• D) The employee is not taxed on the compensation amount when it is deposited in an escrow account.

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Definitions:

IRS Regulations

Rules and guidelines issued by the Internal Revenue Service governing federal tax administration in the United States.

Employment Taxes

Taxes that an employer is required to withhold and/or pay on behalf of their employees, including income tax, social security, and Medicare taxes.

Family Leave

An approved absence from work, typically for the birth or adoption of a child or for the care of family members.

Medical Leave

Authorized absence from work granted to an employee due to health reasons, ensuring job protection and, in some cases, continued pay.