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Are distribution from 404(k) Pass Through ESOP taxable on…

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Are distribution from 404(k)...

Are distribution from 404(k) Pass Through ESOP taxable on state level, are we required to withhold state tax?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

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Accountant's Assistant: Is there anything else important you think the Accountant should know?

We are withholding and reporting agent,

Submitted: 3 months ago.Category: Tax
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3/22/2018
Tax Professional: rakhi.v, Tax Attorney replied 3 months ago
rakhi.v
rakhi.v, Tax Attorney
Category: Tax
Satisfied Customers: 4,550
Experience: Have graduated in Law with specialization & emphasis in Financial Laws and has working experience of over a decade.
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Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

Yes, withholding is required.

Employee stock ownership plan (ESOP) Taxation rules dictate the value of a participating employee’s ESOP account, including company contributions and any appreciation in the value of the account, is not taxable to the employee while it accumulates in the ESOP.

Distributions from the ESOP are subject to ESOP taxation, but favorable tax treatment may apply to lump sum distributions in the form of company stock.

For distributions received prior to age 59-1/2, an additional 10 percent excise tax is generally imposed unless the distribution was made on or after the employee’s death, disability, or separation from service after attaining age 55. Deductible cash dividends paid to ESOP participants are not subject to the early distribution excise tax; this favorable treatment under ESOP taxation does not extend to S corporation distributions.

Eligible ESOP taxation distributions may be rolled over into an IRA or another qualified plan, in which case income taxes will be deferred.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

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