topic esop and ksop in Retirement tax questions

esop and ksop

deactq — Tue, 24 Mar 2020 14:39:35 GMT

The state of PA is asking what State type code to select. I do not know what to select. My 1099R does not state anything about this. The options are below

ESOP: Allociated ESOP stock dividend

ESOP; Non-Allocated ESOP stock dividend

KSOP: Taxable ESOP within 401K

KSOP: Nontaxable ESOP within 401k

Can you help with this?

Re: esop and ksop

KatrinaB48 — Tue, 24 Mar 2020 15:13:59 GMT

What code do you see in box 7 of your 1099-R? If you see code u in box 7 then you have a dividend distribution from ESOP under sec 404(k). According to the Pennsylvania Department of Revenue, if the stock in the ESOP has been allocated to the plan participants, the income is dividend income to the recipient of the 1099-R and should be reported on PA Schedule B. If the stock in the ESOP has not yet been allocated to the plan participants, the income is compensation to the recipient. Therefore, you will need to contact the financial institution that issued your 1099-R to find out which it is.

Re: esop and ksop

deactq — Tue, 24 Mar 2020 15:33:50 GMT

The 1099R in box 7 states the code is 7, and I selected that when entering the 401K info.

Now at the end of the state tax review they requested the information regarding they detail as I stated so I am confused. Does this info make this somewhat clearer in terms of what I am asking?

Also I contacted the 401k investment group that I have and they could not tell and and suggested I check with Turbo Tax.

Re: esop and ksop

DMarkM1 — Tue, 24 Mar 2020 16:01:44 GMT

When you go through the PA interview edit the "Income Adjustments" section. You should get to a page asking about the retirement distribution. There will be a dropdown menu with many options.

If you have no indication of any specific retirement plan on the list then select "Eligible..no PA taxes". PA excludes almost all retirement pensions from state income tax.

Re: esop and ksop

deactq — Tue, 24 Mar 2020 17:09:04 GMT

this is what the drop down says...may issue is with reference to my 401K and so the last two lines below state info on the 401k and I was wondering if I should select either of these.

Re: esop and ksop

deactq — Tue, 24 Mar 2020 17:09:53 GMT

sorry forgot to paste it.

ESOP: Allociated ESOP stock dividend

ESOP; Non-Allocated ESOP stock dividend

KSOP: Taxable ESOP within 401K

KSOP: Nontaxable ESOP within 401k

Re: esop and ksop

MaryK4 — Wed, 25 Mar 2020 03:02:20 GMT

Code U

If the stock in the ESOP has been allocated to the plan participants, the income is dividend income to the recipient. If the ESOP allocates shares to each eligible employee every year, giving employees an increasing ownership stake as they gain seniority. The ESOP distributes these shares to employees to fund their retirement.

If the stock in the ESOP has not yet been allocated to the plan participants, the income is compensation to the recipient.

@deactq