I withdrew from my retirement account (ESOP). Is this taxable? Is a ESOP account the same as ESOP employer stock dividends? (If so this may lower my taxes).

I received a form 1099-R from a ESOP distribution from a former employer. Box 2a has a value and box 7 has a 1. However, per TurboTax One of the situations to lower your taxes is the following: withdrew the money from ESOP employer stock dividends. I am not sure if my ESOP is consider employer stock dividends. Please advise.

421

Expert Alumni

Feb 17, 2022 6:35:13 PM

No. According to macuser_22 in this Turbo Tax post, this is strictly taxable income with no known exceptions. He/she states

that "Gains and losses on securities held in qualified, tax deferred, retirements plans are not reported of claimed outside of the retirement plan. Your retirement plan will simply have more or less money to be taxed on when withdrawn".

Taxable distributions from those plans are taxed as ordinary income at your marginal tax rate with no known exceptions.

[ Edited 02/17/22| 06:41 PMPST]

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I withdrew from my retirement account (ESOP). Is this taxable? Is a ESOP account the same as ESOP employer stock dividends? (If so this may lower my taxes).