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Old 03-27-2018, 09:37 AM
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Join Date: Mar 2018
Posts: 1
ESOP Distribution

Good morning,
I was laid off from a company that had was an ESOP. I have shares that they will distribute in a lump sum. The balance is $36,942. I also have a payment plan set up with the IRS for back taxes. That balance is around $16,360. I also owe on state back taxes of $13,000. I am wanting to pay the taxes off. What is the best way to go about this to minimize my tax exposure and pay off all taxes.


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Old 03-27-2018, 11:10 PM
Join Date: Oct 2010
Posts: 5,239
you as a Beneficiary of theESOP plans, are taxed in the year that amounts are distributed or made available to you;also, the distributions are taxed as ordinary income, but when you receive a lump-sum distribution in the form of stock, you'll generally pay ordinary income tax on the value of your employer's contributions to the plan, and capital gains tax on the appreciation in stock value when the stock is sold. The holdings become taxable to the you when later withdrawn from the ESOP I mean, upon retirement or departure from the company, unless transferred to another retirement account. However, In certain circumstances, ESOP participants may receive dividends from an ESOP or directly from the sponsoring company. Such dividends will result in current taxable income to you. Unlike ?conventional? dividends that may qualify for favorable long-term capital gain tax ratesthese dividends are taxed as ordinary income because they are treated as distributions from a qualified plan.to avoid paying back tyaxes on your esop d/b you may transfer/roll it over to your retirement plan. If you put the money into a traditional (not Roth IRA) IRA or the distribution is rolled forward into another qualified retirement plan in another company, there is no tax until the money is withdrawn, when the withdrawal is taxed as ordinary income but Amounts rolled over into a R-IRA are taxable, but are tax-free when withdrawn if that is done according to the R-IRA rules.
You don?t need to put your tax bill on a high-interest credit card since the IRS charges a far lower interest rate than credit card companies. So,you can spend more of your money paying off the balance instead of just keeping up with the interest.

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