Law360, New York (May 11, 2015, 7:16 AM EDT) -- In Chief Counsel Advice 201518013 (CCA)[1] released on May 1, 2015, the IRS took the position that an executive's retention agreement violated Code section 409A[2] and therefore was subject to an additional 20 percent federal income tax — potentially subjecting the bonus to a 59.6 percent marginal federal income tax rate. The executive's employer had realized the error and attempted to correct the retention agreement before the bonus was paid, but the IRS determined that the correction came too late. This CCA underscores the importance of ensuring that bonus plans, employment and retention agreements, and severance agreements comply with section 409A from inception. If correction is necessary, companies should consider all available possibilities for correcting section 409A violations, both within and outside of the IRS formal corrections program. In either event, timing matters....