jwilcox746[at]hotmail.com wrote:

- quote -

Hmm. Your FAQ is out of context. I.e., I can't see the
document. This sounds like an ESOP, not an ESPP. The
problem I have with it being an ESPP, is that the company
may only sell the shares to the employee at a price that is
not less than 85% of market on the date of purchase. I
don't see how this matching doesn't violate the 85% rule.
ESOPs don't have this rule.

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- quote -

Hello Alan,

First of all, thank you for taking time to reply.

Regardless of what IRC Sec. 423 says, my employer does match
my ESPP contribution. Here is a copy of the FAQ from my
employers HR site:

5. HOW WILL THE COMPANY MATCH MY CONTRIBUTION?
The company match is made on a quarterly basis, one year
after the employee contribution is made. The only
requirement to receive the match is that you are employed at
the time it is allocated, i.e. on the last day of the
quarter. For example, contributions made in the first
quarter of the year 2000 are matched on March 31, 2001. You
are fully vested in the company match as soon as it is
allocated!

6. HOW MUCH WILL THE COMPANY MATCH?
The Company will match your contributions on a quarterly
basis at a 33 1/3% or 50% rate, depending on your officer
status. Employees with the designation of AVP, VP or
President are eligible for the 50% match. Employees with ten
years of service are also eligible for the 50% match. The
match is a percentage of dollars contributed rather than
shares purchased.

**********

I've not read the IRC you refer to, but perhaps the catch
here is the last line of FAQ 6 "The match is a percentage of
dollars contributed rather than shares purchased."

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wilcox746[at]hotmail.com wrote:

- quote -

ESPP: Employee Stock Purchase Plan as defined in IRC Sec.
423. There is no employer matching in an ESPP.

--
Alan
http://taxtopics.net

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jwilcox746[at]hotmail.com wrote:

- quote -

Okay, you asked. Here goes.

Great opportunity, getting free money from employer into the
ESPP. To do that, I understand you would have to decrease
withholding in order JUST to pay living expenses, right?
And therefore you would be amenable to paying a 500$ penalty
to IRS for underpayment of taxes.

Well, nothing wrong with that, true.

So, consider the increased contribution to the ESPP one
transaction. And consider the possible penalty yet another.
To avoid the penalty, wouldn't it make more sense to leave
withholding alone, so that your balance on April 15th be
999$ or less, while actually borrowing the money? Or would
borrowing the money be at a higher rate than the IRS
penalty?

Food for thought.

ChEAr$,
Harlan Lunsford, EA n LA
Thu, 6 Jan 2005

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My employer offers an ESPP plan with a quarterly match at
33.3% to be paid one year later. I'm considering upping my
ESPP contribution to match what my normal withholding would
have been, then claim 9 allowances on my W4.

At the end of the tax year, I would cut a check to the IRS
for the income tax due. As best I can tell, I'm looking at
paying a $500 fee for paying late.

I would have at the end of the year put approximately $7000
into the ESPP. The following year I would stand to receive
another $2300 in employer matching funds. This would more
than make up for the $500 late fee the IRS would charge.
Thoughts or suggestions would be appreciated.

Regards,

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