IRS Auditing Executive Compensations - US

ABCNEWS.com : IRS Auditing Executive Compensations:

The Associated Press

WASHINGTON Dec. 4 — The Internal Revenue Service is auditing two dozen companies to make sure they followed the rules for compensating executives, scrutinizing corporate perks such as stock options and the use of private jets and luxury apartments.

The examinations will focus on more companies and possibly mean auditing the personal tax returns of some corporate leaders, said Keith Jones, the agency's director of field specialists.

"Executive pay packages have become much more complex. We're taking a close look at these vehicles to make sure they fully comply with the law," IRS Commissioner Mark Everson said.

The IRS started its inquiries this summer to find out whether companies were following the rules for fringe benefits and other forms of paying top officers. The review came as corporate bankruptcies exposed the lavish lifestyles of some executives.

The audits, geared toward companies with $10 million or more in assets, intensified this fall. The IRS, which is not identifying the companies, plans to use its findings from the first batch of audits and expand the investigations.

The agency identified eight areas of scrutiny. The list includes rules regarding the business and personal use of fringe benefits such as private jets and vacation homes. Golden parachutes, or benefits packages granted to executives when they leave a company, are under review. The IRS is examining deferred compensation programs and stock options to make sure they are taxed appropriately.

Also being studied are laws that cap deductible compensation at $1 million, arrangements that transfer compensation among family members and employee leasing programs.

Jones said the IRS views the audits part of the government effort to increase its oversight of corporate America in the wake of a series of business and accounting scandals.

"This is a corporate governance issue," Jones said.