Your client is not permitted to deduct a year-end accrual for vacation pay earned but not paid. This result occurs because the tax law considers this to be deferred compensation that is ineligible for the recurring item exception, unless it is paid by March 15 of the year following the accrual [see §§ 404(a)(5) and (6)]. Your client has asked whether the related accrued Social Security taxes on the vacation pay can be accrued under the general recurring item exception because these taxes will be paid by the fifteenth day of the ninth month after the close of the tax year.