Social Security

GAO discussed taxation of nonqualified deferred compensation. GAO found that: (1) income deferral plans represented employers' promises to provide future income to employees for services they currently rendered; (2) self-employed persons could also defer income through contractual agreements with their clients; (3) deferred incomes provided advantages for persons with current income at or over the social security wage base; (4) self-employed taxpayers used contractual arrangements to defer income, but not extensively; (5) risks associated with collecting deferred income and tax prerequisites were discouraging factors; (6) deferred income tax requirements evolved from concerns about how employee voluntary contributions to qualified deferred compensation plans could escape social security taxes; (7) Congress also changed social security tax rules for employer-sponsored nonqualified plans; (8) limited reporting on nonqualified plans precluded measurement of the effects of the tax requirements on social security revenues; (9) Internal Revenue Service (IRS) officials believed that the requirements complicated tax administration and that further regulations on use of the provision were necessary; and (10) IRS did not issue such regulations because of higher priority projects and problems in drafting regulations.