Initial shares given to employees

[Pacun]

My employer became public in 2002 and I was given 30 shares which later split. I have 60 shares and the company was purchased and it will be a private held company and the purchasing company will buy all shares.

If I recall properly, the 30 share were added to my 401k plan but no FICA was taken from my paycheck. I believe we will get a check but I have not paid FICA taxes. Does anyone know the tax consequences if the company hands me a check?

If the 401k administrator gets the check, they will reinvest it and nothing will hapen. How about when I take out my money from my 401k, will I have to pay FICA on that amount or is there something on the code that allow companies to give their employees initial shares and no one pays FICA?

[ILLMAS]

Usually you don't pay FICA on unearned income, which is your case.

[jainen]

>>no FICA was taken from my paycheck<<

Interesting question. Payroll taxes are paid by the EMPLOYER. If they didn't withhold from you, that's not your problem. It might not be true--there are a few scenarios under which it may have been handled correctly without your knowledge, but realistically the company probably cheated to avoid payroll taxes on the non-cash compensation. At this point, what you do depends on whether you want to make a fuss with your new employers, which in turn depends on how important Social Security credits are for you. Start by verifying your Social Security record for the year in question.