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How can i cash in my esop.?

Apr 10, 2012 by kieu from Honolulu, HI in  |  Flag
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Employees may cash out from an ESOP plan based on the terms listed in the ESOP plan guidelines.

Step 1 Call the ESOP plan administrator to confirm the rules for your ESOP distribution. The IRS requires distributions resulting from employee death or disability to start distributions no later than the year following death or distribution. Distributions resulting from employment termination must begin within six years following job termination.

Step 2 Confirm the percentage of stock that is vested. Vesting computes how much of the stock the employee owns. Before an employee can be 100 percent vested, he must work with the company for a defined number of years. Vesting follows two types of schedules--one in which the percentage goes from zero to 100 percent after a defined anniversary date and the other in which each year of employment after the second adds 20 percent vested value.

Step 3 Request the forms required to take a cash distribution. Fill out the forms to take either a lump-sum distribution or periodic payments from the ESOP plan, as well as federal tax withholding. Sign and submit the forms.

Step 4 Add the distribution to your adjusted gross income when filing taxes. The plan administrator will send you an IRS Form 1099 to report the distribution.

If the ESOP is in a qualified retirement plan, and you are not yet 59 1/2, a 10 percent tax penalty is applied to the liquidation

Comment   |  Flag   |  Apr 10, 2012 from Lititz, PA

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