My husband is finalizing our divorce with the courts on Wednesday.
He is asking for a court order that would allow him to withdraw funds from his
ESOP in order to settle asset division in the divorce. The court order states
that the check from the ESOP will be sent to me.
My question is who will have to pay taxes on and report the money? Him or me?
We have been physically separated for all of 2013, so I know that I can file
taxes as single "head of household" and I know that I will receive a
generous tax refund because I qualify for the earned income credit, child
credit, etc. so I don't want to jeopardize losing that refund because of this
ESOP disbursement.
Please help.
Answer:
So, your question is: when you receive a percentage of your
psouse’s ESOP account in your divorce settlement, then how much should be held
back for taxes and how is it declared? I assume that the paying spouse's
company did not hold out any taxes or fees on the disbursement.As long as the
distribution is made via a check from an ESOP retirement plan then it would all
be subject to income taxes for 2013. You should receive a 1099-R next January,
2014, as long as the distribution is made in accordance with a QDRO, Qualified
Domestic Relations Orders, then the 10% penalty will not apply. Additional
exceptions for qualified retirement plans...Read more…
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