Hi,
The company I worked for was bought out. I was wondering how hard my icome tax "return" will be hit if I take the cash payout option for my ESOP? I usually get $3,000 back.

They said that of the $20,000 I have in ESOP, that they will withhold 20% for federal taxes. Meaning I could get $16,000 payout.

I know there is a 10% penalty, but how will that effect my tax return?

I assume the 10% penalty will be $2,000 but they withheld $4,000 for income tax.

How much of that will I get back or have to pay in?????? Will it be a wash?

Thanks for your help.

-Allister

Now that

Welcome to Answerpool.

Im basing this on a QUADRO I had years ago: When you file your taxes, they will add $20,000 as additional income. What you get back will depend on your deductions. You can avoid this tax by rolling it over into another account. They are taking the first 20% right out of the fund before you get it. The 10% tax will only be for the portion of your added income. You should end up with about $14,000 from your fund if you cash out. Your tax refund should stay close to the same.

Your situation may be a little different than mine. Try calling the IRS. They are very helpful and not as scary as you might think.

Live Telephone Assistance
Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time). When calling, you may ask questions to help you prepare your tax return, or ask about a notice you have received.

Telephone Assistance for Individuals
Toll-Free, 1-800-829-1040.

Lets just say I am taking it out.
I know I can avoid all taxes and penalties rolling it over.

That is why I am inquiring as to if the cash payout will effect my income tax return under the above mentioned circumstances.

It would be impossible for me to estimate your return. You would have to figure out if the extra money is going to put you into a higher tax bracket. I'm sorry I can't give you more information. I suggest calling the IRS number above. They are very helpful and you can speak more openly about your finances than you can here.