Restricted Stock Units (RSU) Sales and Tax Reporting

105 Comments on Restricted Stock Units (RSU) Sales and Tax Reporting

1. Anonymous on February 27, 2008 | permalink
   
    

   In sell to cover, do you not account for the other 59 shares which you’ve held on to? Being given only the sell to cover option, and quarterly vestings of RSUs in 2007, I vest four times during which stock is automatically sold to cover taxes. I sell the remaining shares from three of these four vests during 2007. 1099B lists these seven transactions. My W2 however, lists ALL the RSU vested value. Do I not worry about reporting on schedule D the vested value of the shares I’m still holding?
2. chris on February 28, 2008 | permalink
   
    

   great question anonymous1- I didn’t get a choice on how my rsu’s were handled- the company sold enough on the day of vesting to cover the taxes they withheld. In one instance, I had roughly 152 shares vest, and 54 were sold immediately to cover the taxes. I’m pretty sure I’m in bucket b in the description above, but I’m interested to see the response to your q.
3. TFB on February 28, 2008 | permalink
   
    

   If you are holding on to the remaining shares (59 shares in my example), you don’t account for them now. You account for them when you sell them, which can be the same year or many years later. At that time, you record your sales proceeds and a cost basis which equals to the value of those shares at the time of vesting. Basically you treat those shares as if you bought them at the price your company calculated on your W-2. That’s why I said you must remember the value of those remaining shares at the time of vesting until you sell them.
4. Jagadeesh on February 28, 2008 | permalink
   
    

   hi
   here is my problem. 100 RSU vested in april’07 for $20 and 39 RSUs were sold to cover the taxes @ $20 (total 39*20=780) on the same day as vesting. But, in my W2, i got a income for 100 RSUs (100*20=$2000). how do i report the 39 RSU’s sold to cover for taxes?
5. TFB on February 29, 2008 | permalink
   
    

   For the 39 RSUs sold for tax withholding, on Schedule D:

   4/xx/2008 sale 780 cost basis 780 gain/loss 0
6. Matt on March 4, 2008 | permalink
   
    

   Thanks for your helpful post on the proper tax treatment for RSUs. I have a question regarding restricted stock awards. In 2007, three relevant transactions occurred:

   Jan07 – Some shares vest and a sale to cover occurs

   Mar07 – Sale remaining shares from those that vested in Jan07

   Dec07 – Additional shares vest and a sale to cover occurs

   I received documentation for all three transactions, but I only received one 1099-B and it just covers the Mar07 transaction. Do I need to account for the Jan07 and Dec07 transactions on my tax forms? If so, should I have received a 1099-B for those or do I just use the documentation I received from the transaction – a “lapse confirmation” showing shares lapsed, shares sold to cover taxes, and net shares?

   Thanks!
7. TFB on March 5, 2008 | permalink
   
    

   Matt – Same answer as I gave to Jagadeesh in the previous comment. Some employers don’t use a broker for the sell-to-cover transactions and they don’t show on 1099-B. In that case, you don’t have a gain or loss on sell-to-cover. The sale proceeds equal exactly the tax withholding reported on your W-2.

   Suppose 40 shares were sold to cover tax withholding of $1,000, I would still enter on Schedule D:

   1/xx/2007 40 shares XYZ Corp. sale $1,000 cost basis $1,000 gain/loss $0

   Make similar entries for the December sell-to-cover transaction.
8. Anonymous on March 5, 2008 | permalink
   
    

   Great info on RSU’s! Current employer is a MasterLimitedPartnership (PTP) – so instead of company “stock”, am dealing with receiving company “units”. Do you know if these are handled & reported on income tax same as RSU?
   Thanks – DB
9. Anonymous on March 11, 2008 | permalink
   
    

   Very helpful. I was lost in TurboTax until I read your post. Thanks so much.
10. Anonymous on March 11, 2008 | permalink
    
     

    Thanks very much for the details. In turbo tax I entered all my details. But when I click Done it takes me to Employee Stock Plan Result page and shows the following details in a table
    Stock Plan, Amt we computed, Is it on w-2, Actual Amount on w2.

    Here is an example:
    No. of Stocks vested : 100
    Price : $100
    No. of Stocks sold to cover the tax : 40

    The results shows in the above Turbo Tax page

    Stock Plan : RSU
    Amount we Computed : $4000
    Is it on W2 : Yes
    Actual Amount on W2: BLANK

    What should be the value in the Actual Amount column 4000 or 10000. In W2 I have 10000 as my earning. if I enter 10000 then my return goes up by around 2000. Please let me know what should be the correct amount.
11. TFB on March 12, 2008 | permalink
    
     

    You must have a different version of TurboTax. My deluxe version doesn’t have a table like that. Anyway, you should look at the Schedule D it produces for you. Put in a value, then open the Schedule D form. The schedule D should show $0 gain/loss for those 40 shares.
12. Steve Loeppky on March 22, 2008 | permalink
    
     

    Just wanted to say thanks. Your write up was very helpful. Thanks again!
13. Anonymous on March 27, 2008 | permalink
    
     

    TFB, Nice Information. Very Useful. However in my case, my employer withheld stock to cover the taxes. Is that the same as sale to cover. The 1099 from the broker does not show the sale but the W2 has the taxable income from the vested RSU’s. Should anything be listed on the my schedule D?
    Example:
    100 RSU Vested
    30 withheld
    70 RSU available to me.
14. TFB on March 28, 2008 | permalink
    
     

    @Anonymous – One more time, same as sell to cover, except no broker was involved and no 1099-B. Same answer as in comment to Jagadeesh and Matt.

    Example:
    100 RSU Vested
    30 withheld
    70 RSU available to you

    Suppose the closing price on the date of vesting is $10 per share. Enter on Schedule D:

    Description: 30 shares XYZ Corp.
    Net Proceeds: 300
    Date of Sale: xx/xx/xxxx (same as vesting date)
    Cost Basis: 300
    Date Acquired: xx/xx/xxxx (same as vesting date)
    Gain/Loss: 0
15. ap on March 30, 2008 | permalink
    
     

    Hello,
    Thanks for the web site.
    I need some help.

    There were 4 times last year when
    my shares vested (4 shares each time) and the company did a sell to cover each time.

    I DID NOT sell any of these.

    Now, I did purchase a few shares thru my company’s ESPP program.

    So, do I need to worry about wash sales due to the RSU sell to cover??

    TurboTAX deluxe does not give me a screen for RSU sales. Does it go under Investement sales as a stock sale?

    THANKS !!
    corsica
16. TFB on March 30, 2008 | permalink
    
     

    ap – You only worry about wash sale when the sale resulted in a loss. If a broker isn’t involved, the company’s sell-to-cover usually creates neither a gain nor a loss. If you do have a loss from sell-to-cover, then you have to take into account the wash sale rules.
17. ap on March 31, 2008 | permalink
    
     

    Thanks TBF. I think a loss is involved (but very small) as there was a broker fee of $5 per sale.

    So, wash sales would apply, correct? I did have a purchase of ESPP during this time.

    another question: Should I check the box where it says taxes were withheld on this sale?

    In my case, the CO did a sell to cover and amount sold was reported in my W-2 under taxes withheld.

    Finally, would this go under Investment sales in TurboTax?

    Thank you!!
18. TFB on March 31, 2008 | permalink
    
     

    ap – If you think of the RSU sell-to-cover transaction as this series of transactions, it will become very clear:

    - The company pays you a cash bonus (income on W2)
    - You use the cash bonus to buy shares (cost basis in shares)
    - You sell some shares (Schedule D gain/loss = sales proceeds minus cost basis minus brokerage fee if any)
    - You turn over the sales proceeds to the company for tax withholding (tax withheld reported on W2)

    So if you bought shares within the wash sale window after taking a small loss, if I were you I’d apply the wash sale rule, i.e. not take the loss on the sale, but increase the cost basis on the ESPP shares by $5.

    ‘No’ to the tax withheld checkbox and yes this goes under investment sales.
19. Maxwell's demon on April 2, 2008 | permalink
    
     

    Here’s a tricky one:

    My employer only gives the option to sell to cover

    The sell to cover happened the day after vesting and the share price had fallen significantly

    My employer regular pay to make up the difference

    My W-2 shows I’ve paid tax on the full value of the shares on the day they vested

    I think I can report a capital loss for the sell to cover as it was a lower price than that reported on my W-2 and I made up the difference out of pay

    But… my 1099 does not have an entry for the sell to cover – can I still report it on Schedule-D?
20. TFB on April 2, 2008 | permalink
    
     

    Maxwell – Whether you receive a 1099 or not, you still sold shares. If you sold for less than your cost basis, you had a loss. See my previous comment on how the sell-to-cover is deconstructed.
21. LM on April 2, 2008 | permalink
    
     

    LM
    I had 8000 RSU shares vest in small blocks between years 1998-2001. I’ve now sold 2000 shares, do I have to use FIFO methodology to report basis to IRS? Also, I’ve heard different advice regarding what stock price can be used for tax basis. Can one use EITHER the grant date price or vesting date price as tax basis?
    Thank you!
22. TFB on April 2, 2008 | permalink
    
     

    LM – Your basis in each lot is the amount of income your employer included on your W-2. If they used price on the vesting date, you must also use that price. If they used price on the grant date (although I haven’t heard of any such case), you must also use that price. Unless you specifically identified the lot(s) at the time you sold those shares, you must use FIFO. You can’t arbitrarily select lots after the fact. See Identifying Shares You Sell on Fairmark.
23. Anonymous on April 4, 2008 | permalink
    
     

    Hello,
    Here is a estimated tax question and not an RSU question

    I’ve never had to pay estimated taxes thus far although I owed some taxes last year and a lot this year.

    Now, TurboTax printed out quarterly estimated tax vouchers for me.

    What is the recommended approach here? Should I pay them or just change withholdings?

    THANKS!
24. TFB on April 4, 2008 | permalink
    
     

    Anon – Change withholdings. It’s much easier. There is no quarterly deadline. You don’t have to remember to mail in the check. You don’t have to remember how much you paid. Your employer reports it for you on your W-2.
25. JackieB on April 4, 2008 | permalink
    
     

    I had restricted stock units that vested in 2007. The month before vesting- I signed an agreement with my company that all shares would be sold upon vesting. The stock vested at $31 per share. The stock sold for $29. The $31 per share award is included on my w-2 as wages in box 1. I am using turbo tax to figure my 2007 taxes. The difference between the price awarded and received is about $10,000 loss. Since the captal gain it should offset is included on a W-2- Is there any way to recognize this loss in 2007? I would appreciate any advice or guidance. Thank you.
26. TFB on April 4, 2008 | permalink
    
     

    JackieB – It’s just as if you employer gave you a cash bonus and you bought those shares at $31 and sold at $29. If you sold other investments which produced capital gains or if you received capital gains distribution from some mutual funds, the loss will offset those gains. After that, you can offset $3,000 of ordinary income. If you still have more loss, the loss is carried forward to the next tax year.
27. Mahesh on April 6, 2008 | permalink
    
     

    I made a post on my blog about how to handle RSU’s in Turbo Tax Premier. Thanks for your tips that helped me get an understanding. link
28. Anonymous on April 8, 2008 | permalink
    
     

    Under the “Sell to Cover” option, I understand that you show the gain or loss on Schedule D (Capital gains), but what I need clarification on is the tax amount associated with the withholding shares. The company held for taxes 100 shares at a market value per share of $25…. so is that $2500 added to your Fed Income tax witheld or is it already in the W2?
29. Tee Dee on April 8, 2008 | permalink
    
     

    thanks for the info on the sell to cover. I understand about reporting the sale on Schedule D. My question is about all the fed tax, fica medicare, fica social security, state tax on the RSA transaction advice. Does that add into what is on my W2? it did not look to me like that was included on my W2, based on reviewing my pay stubs for the sale time frame. for example, if the sale advice says fed tax paid is $100, and W2 says fed tax paid is $345, should tax paid on 1040 be $445? (seems like self-evident, but since I;ve typed it all now…)
30. TFB on April 8, 2008 | permalink
    
     

    The RSU related income and tax withholdings are already included in your W-2. Use the numbers from W-2 as-is.
31. Sridhar on April 9, 2008 | permalink
    
     

    Hi,

    I did cash transfer for paying the tax (your option 3). How should the with holding be shown on W2 ?

    The cost basis for RSUs was used to show the income correctly, but the taxes withheld does not include the tax money I paid in cash. W2 shows this under Year to date deductions as Restricted stock offset and last payslip 12/31/2007 includes this in after tax deductions. I am confused as to what to show in Schedule D and how to get the tax withheld included in filing for this year.
    Any help would be great.

    e.g:
    No. of RSUs 150
    Cost Basis $7.86
    RS earnings : 1179

    Restricted Stock offset is shown as 677.33 Th Cash transfer I did was actually $501.67 (42.55% tax)
32. TFB on April 9, 2008 | permalink
    
     

    Sridhar – You did cash transfer. No shares were sold. Therefore nothing to report on Schedule D for last year (unless you sold the shares later in the year). Use the W-2 numbers as-is. Both the 1,179 income and 501.67 taxes you paid are already included on your W-2.
33. Anonymous on April 13, 2008 | permalink
    
     

    My husband has RSU and on his statement of taxable income it list

    10/28/07 vested 68 shares Value basis 13.57 , W-2 income 922.76.

    He is in cover to sell so on 10/28/07 57 shares sold at 13.11 W-2 income is 773.49.

    In turbo tax I enter in the 57 shares. It ask me for a value lot in which I enter the 68 shares at market price 13.57 vested on 10/28.

    On the Statement of taxable income both the 922.76 and the 773.49 are listed as income but in turbo tax it list only th 773.49 as W-2 income.

    Have I done something wrong.
34. Anonymous on April 13, 2008 | permalink
    
     

    Thanks for the detailed information. Does the RSU vesting schedule invalidate a loss (due to wash rules)? More specifically, say 100 shares vested on Jan 10 2007 as a part of a quarterly vesting schedule. So, 100 shares would vest on Apr 10 2007 as well. If I sell 100 shares vested from Jan 10, at a loss on Apr 3, Can I get the tax adjustment for the loss. Any ideas?

    Thanks,
    Mak
35. TFB on April 13, 2008 | permalink
    
     

    Mak – For the purpose of applying wash sale rules, treat RSU vesting as buying shares. In your example,

    1/10/07 buy 100 shares
    4/3/07 sell 100 shares at a loss
    4/10/07 buy 100 shares

    I would say the sale on 4/3/07 is a wash sale because you bought the same stock within 30 days after the sale. For more info on wash sale, see Wash Sales 101 on Fairmark.

    Previous anon – Please read this post, the comments, and the follow-up post for sell to cover again. It’s already been covered many times.
36. Anonymous on May 8, 2008 | permalink
    
     

    Would taxation and reporting of taxes be different if the company isn’t public? What if I’m granted RSU’s w/c are fully vested, do I need to pay income tax on this now? What would be my options for paying the taxes, since I can’t sell because the company is not yet public?
37. A&F Tax Guy on May 15, 2008 | permalink
    
     

    Excellent article! I have a simple question from an employer’s side which I cannot find an answer for:

    When restricted stock vests, should the taxable income (included in Box 1, 3, 5…) also be reported under ‘Box 12 Code V—Income from the exercise of nonstatutory stock option(s)?’ Or, are there no reporting requirements, allowing the employer to include it in Box 14 at their discretion?

    Thanks for your help!
38. PayrollMan on July 29, 2008 | permalink
    
     

    Was there ever an answer to the May 15th Question from Tax Guy ?
    I have the same exact question about W2 reporting from an Employers side.
39. TFB on July 30, 2008 | permalink
    
     

    Sorry I don’t have any insight into what an employer is supposed to do with regard to W-2. I imagine employers who issue RSUs have accountants and tax attorneys advising them.
40. TaxMan on October 11, 2008 | permalink
    
     

    TFB – Thanks for providing the information. It has been very useful.

    I have a couple questions regarding RSU. My wife has 1000 RSUs vested 4 times (250 RSU each) in 2007 on 3/31, 6/31, 9/31 and 12/31. At each vesting schedule, say 100 shares were sold to cover the tax. The brokerage firm reported the sell-to-cover a few days after each vesting date on 1099-B. For the last vesting, it didn’t report the sales for 2007, but rather in 2008. Should I report the sell-to-cover for the last schedule vesting in 2007 return or 2008 return? If I report in 2008 return, then the income number of 2007 from 750 shares do not match with her company report in W-2 of 1000 shares, in which case I gained some tax refund. Is it a problem? Do I need to report the 1000 shares vested in 2007 even though the last sale was actually occured in early january of 2008? Any answers are appreciated.
41. TFB on October 11, 2008 | permalink
    
     

    TaxMan – You still report the income and tax withholding for 1,000 shares in 2007 according to the W-2 issued by the company. You report the last sale of 100 shares in 2008 but the sale shouldn’t have too much tax consequence (maybe a small gain or loss). See the follow-up post RSU Sell To Cover Deconstructed.
42. TaxMan on October 13, 2008 | permalink
    
     

    TFB – I’m using Turbo Tax Premier and if I only reported the first three sales from the 750 shares vested, Turbo Tax calculated the income only from those 750 shares and at the end it asked me whether the calculation matched with that in the W-2. Obviously it was not matched because the W-2 report higher income (from the total of 1000 shares). I had to say NO to the question. As a result, Turbo Tax subtracted the income from the last 250 shares from my 2007 W-2 income; thus yielding some additional refund. I don’t think this is correct, but I don’t know how to correctly enter the vesting info for the last 250 shares. I tried to create another investment sale with no sale data and just entered lot award with those last 250 shares, then Turbo Tax calculation matched with the figure in W-2. However, Turbo complained at the error check that this investment is incorrect because there were no sale date, sale price, etc. Any helps with this problem is much appreciated.
43. TFB on October 13, 2008 | permalink
    
     

    Mahesh posted the TurboTax Premier step-by-step with screenshots in the comments to this post. To be honest I think the extra guidance in TurboTax Premier is making it more confusing to you than being helpful. I suggest that you either say YES to that question so TurboTax doesn’t modify your W-2 or not use the RSU section altogether and just enter 3 regular investment sales instead.
44. grateful reader on January 31, 2009 | permalink
    
     

    Thanks for the clear, concise description of tax handling for RSUs. Had to deal with this for the first time this year, and your writeup was a life saver. You’ve gained another reader here.
45. lesley on February 17, 2009 | permalink
    
     

    It is now 2/09 can you clarify how I would report this RSU. This is all the different info I find on trade confirmation 1099 B
    Grant date 11/18/03, Units granted 500, Lapse date 12/1/07, Date Acquired cover of short 12/3/07. Grant Price $0, FMV $25135.00, 148 units witheld for taxes, remaining units 358. Tax due 7402.26, Tax Paid 7439.96, fee $35.36. Sold date 11/17/08, Sold 200, price 52.9501 amount 10590.02.

    Is the 12/1/07 date the vested date? is that the same as the acquired cover of short or is 12/03/07? Are either of those two dates the vested/release date?. Would the market price be the 52.9501…is that the price I paid per share? I get that the shares witheld are 148 and 7439.96 was paid in taxes…but when? In 2007? Or when 200 were sold on 11/17/08?

    The terms used from the broker somewhat differ then that of turbotax…so it is confusing to know which is what and where to put it?
46. TFB on February 18, 2009 | permalink
    
     

    lesley – 12/1/07 is the vesting date but it was a Saturday so you got the RSUs on the next business day 12/3/07. You paid the tax $7,439.96 in 2007. The rest is covered in the follow-up post “RSU Sell To Cover Deconstructed.”
47. lesley on February 18, 2009 | permalink
    
     

    When filing 2007 tax form, I didnt realize at the time that if I received lapsed rsu (12/2/07) that I had to file it for 2007. I thought I only had to when stock was sold. I am just learning this now b/c we sold some lapsed RSU 11/08 and am investigating it. I suppose that means I must file and amended 2007 return!
48. JoeBlow on February 19, 2009 | permalink
    
     

    Thanks for this info! My company switched from offering stock options to awarding RSU’s and I just had my first lump sum vest this week.

    The company withheld 38% of the shares to pay taxes, so from an award of 500 shares, I am now left with 310.

    My question is, since my tax bracket is not 38% (more like 25%-28%), would the extra money withheld be returned to me at tax time assuming I don’t owe more to the govt? It seems to me, that I was just overcharged for this stock grant. Even the wealthiest people are only taxed at 35%. I just don’t understand how they came to the 38% withholding figure.

    I think I have a handle on the remaining shares and how to report any income or loss.

    Thanks.
49. TFB on February 19, 2009 | permalink
    
     

    JoeBlow – The withholding includes taxes for federal, state, and Social Security and Medicare. It can easily get to 38% if you add 25% federal, 5% state and 7.65% SS and Medicare. If your tax bracket isn’t that high, you will get the difference back for federal and state at tax time next year.
50. Sammy on February 22, 2009 | permalink
    
     

    Under RSU, I was awarded 500 shares of my company. I used the option to sell all shares. Company held 200 shares for tax purposes and sold only 300 shares at my brokerage account. My 1099B shows 300 shares sold and sale value. Also my W-2 shows FMV for 500 shares as award and FMV of 200 shares for tax withholding. As my 1099-B only show 300 share sale, what do I report as cost basis for this?
    Thanks.
51. Naren on March 4, 2009 | permalink
    
     

    Say, company sold 41 RSUs at $50 to cover for the taxes. If I take capital loss in Schedule D from other stock sales to be -$5K. Does this mean my net capital loss is -5K + 41*50 because 41 shares were sold at $51 with cost basis 0 to cover for taxes? and then I can deduct 3K loss from total income.
52. TFB on March 4, 2009 | permalink
    
     

    Naren – No. The 41 shares sold have cost basis at the price they included as income on your W-2. See the follow-up post “RSU Sell To Cover Deconstructed.”
53. kate on March 4, 2009 | permalink
    
     

    Can I assume that Cost Basis is the same thing as Gross Dollars on my Smith barney Transactions History Statement?
54. TFB on March 4, 2009 | permalink
    
     

    kate – No. That’s what this entire post is about. Please read it in its entirety.
55. Tom on March 4, 2009 | permalink
    
     

    In 2002 and 2003, I received certificates of stock from my company following vesting of restricted stock. The shares were subsequently sold, and I now need the cost basis to determine net revenue for taxes. Unfortunately, my company managed the transactions internally, and there are no broker records where this is broken out. On the certificates, there are dates shown in the lower left corner. Is it possible that those are the vesting dates (which could then be used for cost basis purposes)? The reason I ask this is that a third certificate was issued in 2005. This was handled by a broker, so I know the vesting date, and it corresponds to the date shown on the bottom left corner of the certificate. Thanks for your help.
56. TFB on March 4, 2009 | permalink
    
     

    Tom – It’s possible but only your employer knows for sure.
57. Ali on March 17, 2009 | permalink
    
     

    My RSU situation is sort of complicated. I had 108 shares given to me by my company in March 2008 that were not supposed to completely vest for 2 years. My company was purchased in late 2008 (prior to the shares being vested) and as part of the buyout, the company paid out the shares (as if they were fully vested) in the form of a ash payout to a brokerage firm. I was taxed at my normal tax rate, as if the award was a cash bonus. The income and taxes were included on my W-2. However, I received a 1099 with all $0 amounts. After speaking with the brokerage firm that handled the transaction, they explained that the shares were never officially awarded (since the company dissolved) and that they were only used by my company to ditribute the cash equivalent to the shares. So my question is, do I treat the money as an Asset that generates Capital Gains (like it’s a stock sale) and complete Schedule D or do I treat it as additional income that’s already included on my W-2 and do nothing further? I’m using TaxCut to prepare my taxes.
58. TFB on March 17, 2009 | permalink
    
     

    @Ali – You do nothing.
59. Paul on March 22, 2009 | permalink
    
     

    I received an RS award in 2008 (334 RSUs @ $4.30). I am using Turbo Tax Deluxe, Where is this info reported, so I can pay the tax on this?
60. J on March 24, 2009 | permalink
    
     

    Regarding your Oct 13th post: “I suggest that you either say YES to that question so TurboTax doesn’t modify your W-2 or not use the RSU section altogether and just enter 3 regular investment sales instead.”

    What are the implications of saying YES or entering regular investment sales?

    I ran into a similar situation where Turbotax wanted to correct my R2. Its RSU calculation (that it wanted to use to update my 2008 W2) seemed to add the vesting value for RSUs from 2007 to the vesting value for 2008 because I sold some RSUs during 2008 that vested in 2007. The vesting value for 2007 had already been account for on my 2007 W2.
61. TFB on March 24, 2009 | permalink
    
     

    @J – I said this a few times in the replies already. I think the simplest way to do this is bypassing the TurboTax handholding for RSUs. Use the Spreadsheet-Style Entries. Not all versions have the extra guidance. That guidance really confuses you more than helping you. The Spreadsheet-Style Entries are much simpler and clearer.
62. Liz Mitchell on July 22, 2009 | permalink
    
     

    How is tax computed on RSU’s if the company does not deliver the RSU’s to the employee until 15 days after the vesting date, and does not allow any transactions during this period (ie employee still is restricted from using the RSU’s)? Assume company withholds just enough shares to cover the tax withholding as calculated on the date of vesting (Sell to Cover).
63. TFB on July 22, 2009 | permalink
    
     

    Liz – Did you ask the company in question? I believe the tax is calculated based on the date when the RSUs are not subject to forfeiture (vesting date). When the RSUs are actually delivered to you or when you are able to sell the shares are not relevant.
64. Linda Dalton on August 14, 2009 | permalink
    
     

    That was so well explained–thank you very much!! We have never received RSU’s before, and I had many confusing questions in my mind regarding the tax handling of these shares. Your article explained everything very clearly!!
65. confused on August 18, 2009 | permalink
    
     

    I have yet another RSU question. I’m doing my taxes. On my W-2 the amount of money I made from the sale of my RSU’s is included with “Wages, Tips & Other Compensation.” My company sold shares for taxes also. How do I avoid double counting this. I’ve included Wages, Tips and Other Compensation on line 7 of the 1040, but then it asks about the schedule D on line 13. If I add those 2 together I’m double counting proceeds from my RSU’s. I’m going crazy. Note, I’m not using Turbo Tax or anything.
    Thanks!
66. tcmocca on February 13, 2010 | permalink
    
     

    How do I determine the cost basis for Restricted Stock Units where a single sale consists of multiple acquisition dates and acquisition prices?
67. TFB on February 13, 2010 | permalink
    
     

    tcmocca – You allocate the proceeds to each lot and treat them separately.
68. Jeremy on February 15, 2010 | permalink
    
     

    Very helpful information here, thank you. I do have the same question as confused on 7/18/2009 though. If the value of the vested RSU’s is added to my wages for the year they vest, some shares sold automatically to cover taxes and I then later sell the remaining RSU’s, aren’t I being double taxed when I then report the sale on my Schedule D?
69. Bruce Brumberg on February 21, 2010 | permalink
    
     

    With restricted stock units, the biggest sources of confusion arise when companies use automatic share withholding for the taxes. Instead of getting all the shares granted, you just get the net shares.

    For example, instead of getting the 1,000 shares in the grant, you only get 750 in your account. You are still taxed on the value of the 1,000 at vesting and need to remember when you eventually sell the 750 shares, that you use the cost basis for this number of shares and not the 1,000 shares.
70. TaxBozo on February 25, 2010 | permalink
    
     

    My company issued me several RSU grants throughout the year. For each one, they sold to cover. The records that came back from the broker has the sell-to-cover transactions arranged in FIFO order, so for example:

    Grant 1: 2/1/2009 100 shares, 40 are sold to cover from grant 1 lot.
    Grant 2: 3/1/2009 100 shares, 40 are sold to cover from grant 1 lot.
    Grant 3: 4/1/2009 100 shares, 40 are sold, 20 from grant 1 & 20 from grant 2.
    Grant 4: 5/1/2009 100 shares, 40 are sold to cover from grant 2.

    This style of reporting seems to contradict the simplified tax statement you have above, and considerably increases my tax liability over these sales. I have heard a rumor at work that I can ignore the broker reports because the sales were made to obviously cover taxes for each grant, and this is adequate documentation of lot allocations so that I can claim them as:

    Grant 1: 2/1/2009 100 shares, 40 are sold to cover from grant 1 lot.
    Grant 2: 3/1/2009 100 shares, 40 are sold to cover from grant 2 lot.
    Grant 3: 4/1/2009 100 shares, 40 are sold to cover from grant 3 lot.
    Grant 4: 5/1/2009 100 shares, 40 are sold to cover from grant 4 lot.

    Is this adequate documentation? (I only have email from my employer and the RSU contract that state this.)

    TaxBozo
71. Claudia on February 27, 2010 | permalink
    
     

    When my RSU vested, I used the option to sell all shares. My company used a broker so I’ve just received a 1099B that lists the gross proceeds instead of the net proceeds (as your “RSU sales and tax reporting” post suggests).
    Where can I report the broker fees?

    Thanks!
72. Lisa on March 2, 2010 | permalink
    
     

    I believe I understand everything that you have said. Thank you for that. My question is…I sold 847 shares. The shares were acquired on different dates. Do I have to input them in turbo tax by the different acquisition dates? Thanks again.
73. Mike on March 6, 2010 | permalink
    
     

    A portion of my restricted stock vested and my employeer sold shares to pay the taxes. The remaining shared are transferred into my e-trade account. My w-2 included the sold to cover the stock but does not include the value of the remaning stock. Do I need to report the remaining stock as income?

    Thanks,
    Mike
74. TFB on March 6, 2010 | permalink
    
     

    Lisa – You should report each lot separately.

    Mike – Double check your W-2. It should include the value of the vested shares as income and the value of the sold shares as tax withholding. If you are sure it’s wrong, contact your employer’s payroll department.
75. mpub on March 10, 2010 | permalink
    
     

    Thank you for your information. It is very helpful and easy to understand

    I have 1 question for you on the sample of SELL to COVER

    since you have 59 shares left for future sellable, what happen if you sell 20 shares for your own use out of 59 shares on the same year with 41 shares (sell to cover tax)

    how do you report on turbo tax premier (turbo tax suggested I use premier version instead of deluxe)?

    I entered as follow:
    100 shares vested
    41 shares sell to cover tax (E-trade sold 41 shares on separate transactions- 39 shares and 2 shares on 1099B)
    sold additional 20 shares on the same year for extra spending.

    I entered 20 shares vested and sold 20 shares but turbo tax increase my income as 20 shares * 50 as my net proceed on W-2

    please advise

    thanks
76. Susan on March 15, 2010 | permalink
    
     

    Thank you very much for the tips. It is very helpful.
    My situation is a little bit more complicated. I had 500 shares of WYE vested at 42.1 on 4/27/2009, because of acquisition by PFE, I was tendered $33 plus 0.985 shares of PFE valued at $17.66 for each shares of WYE on 10/16/2009. I am still holding PFE shares. How do I report my tax return using Turbo Tax? Thanks in advance for your advice.
77. VR on March 15, 2010 | permalink
    
     

    Thank you very much for all your tips – I really learnt a lot. Here is my situation:

    89 shares vested on 05/27/2007
    24 shares were withheld by my company and sold on the same day for taxes
    65 shares were deposited into my e-trade account
    my company reported both income and taxes on the W2
    my company did not use the broker for the withheld shares
    i did not sell any of these shares in 2007 so, i just reported what was on W2 in 2008 tax year
    i did not report the withheld share sale by my company – am i in violation of something?

    i sold the 65 shares on two different days in 2009
    30 on 10/27/2009
    35 on 11/04/2009

    All above examples are about selling all shares in one lot the same they vested.
    How do I report this sale in 2010 using turbo tax since they are nearly 3 years later and in multiple sales?
    Do I need to report the withheld shares also – if so how since 2 years have past?

    Any help will be much appreciated.
78. Cathy J. on March 19, 2010 | permalink
    
     

    Hi. I’m so confused. My husband received stock from his employer — they are calling it an award, “Employee Free Shares Plan.” Each year, depending on how business does, they give an award, half in cash, paid through his paycheck, and half in shares of their Company stock. (Not sure if it matters, but it is in pounds converted to USD when we sold shares.) In 2009, he sold his shares that were given to him in 2008 and in 2009 (so I’m supposed to split into long and short-term if I understand correctly from all my reading). He received a 1099-DIV, which was just dividends, so that was easy. Also received a 1099-B. On the 1099’s, the account is referred to as “Restricted Stock Plan Account.” I’m using Turbo Tax Deluxe, and it is asking me questions such as Cost Basis and dates acquired. I’ve also read here and in IRS documents about whether or not it was included on his W2 as income… I have no idea what to do. Any help you can give would be much appreciated. Can’t afford to go to tax consultant right now!!! Thanks.
79. TFB on March 19, 2010 | permalink
    
     

    VR – If your company didn’t use a broker and simply gave you fewer shares to begin with, you don’t have to report the withheld shares.

    Everyone – When your shares vest, think of it as receiving a cash bonus and buying shares with that bonus. The cash bonus is added to your income on the W-2. Your cost basis in each share is the price per share on the vesting date. When you sell your shares, you report the sale proceeds, your cost basis, and your gain or loss.
80. Susan on March 20, 2010 | permalink
    
     

    Hi TFB – But if the RSU shares turned into shares of a different company, the acquisition company, was the transaction considered as selling of the original shares and then buying of the new acquisition company shares? Or was the transaction simply considered continuing holding of the old shares?
81. TFB on March 20, 2010 | permalink
    
     

    Susan – For your part-stock-part-cash merger, you have to take into consideration the value of the PFE shares you received on the date of the merger. Basically if the value of the PFE shares you received on the merger effective date was greater than your cost basis in your WYE shares, you carry your cost basis into the PFE shares and the cash portion is all capital gains distribution. If the value of the PFE shares was less than your cost basis in WYE shares, the excess cost basis becomes non-taxable return of capital and any additional cash on top of that is a capital gain.

    I googled “cash stock merger cost basis” and got this PDF document by Schwab as the first link. There are some examples there. If you read carefully and follow the examples with your own situation, you will get it.
82. TFB on March 20, 2010 | permalink
    
     

    Susan – You may also find this calculator helpful.
83. Poo on March 21, 2010 | permalink
    
     

    Thanks for the article.

    I think i understand it but i want to make sure i got it right and i do have a couple of questions

    Lets say i have 100 rsus which vested on april 2009 and 50 rsu vested on Nov 2009 and the value basis for both are 20$
    My company withheld taxes using shares (amt of taxes is mentioned for each of these allotments in etrade)

    example :
    100 RSUs at value bases 20$ : Taxes withheld by employer were 1000$ and 70 shares were given back to me.
    I sold the 70 shares after 15 days in april itself for say 25$, after SEC and brokerage fee i get 1729$

    When filling taxes using a software i enter 2 different entries
    1. For the 30 shares, cost and selling price = 1000$, so profit/loss = 0.
    2. for the 70 shares is it correct to fill the cost basis as whats mentioned in my W2 ? 100 * 20 = 2000$ and selling price as 1729 ?

    Now for the 50 RSU, my company say kept 20 and gave me 30 shares. I’ll file 0 as profit/loss using the taxes withheld.

    What do i do for the remaining 30? I have not sold the 30 shares in 2009 and my W2 does include 50 * 20(value basis) = 1000. I did sell them in 2010.
84. TFB on March 21, 2010 | permalink
    
     

    Poo – That’s not correct. Read the article again and also read the follow-up RSU Sell to Cover Deconstructed.
85. Poo on March 21, 2010 | permalink
    
     

    sorry about not understanding it correctly. I tried reading it again.

    Did i get the cost basis incorrect? I think I’m confused.

    Is my cost basis 70 * 20? What about the W2 income?
86. Poo on March 21, 2010 | permalink
    
     

    I think i get it now.

    The cash bonus of 2000 and the taxes of 1000$ are already accounted for.
    So now if i sell at a price greater than 20 i report gain else loss.

    So in case 1
    for the 70 shares i put the cost basis as 70*20 = 1400 and my selling price as 70*25-20 = 1729 and hence i have a capital gain.

    For case2
    I remember my cost basis as 30*20 and when i file my 2010 taxes i use that amt.

    Thanks a lot for this great read!!
87. Ashley Dunham on March 24, 2010 | permalink
    
     

    This is great information. I have RSUs that vest once a year over the course of four years. My company forces “sell to cover” and does not use a broker (apparently) as I have never received a 1099-B for these transactions.

    I just filed my 2009 taxes and was not aware that I should enter anything into Schedule D since I had no short-term gain/loss on the transaction and all income and tax withholding information was already included on my W-2. Since the event creates no unreported tax implications, is this really an issue? Do I need to go back and amend my return to account for the zero gain/loss transaction? I hope not.

    Thanks.
88. TFB on March 24, 2010 | permalink
    
     

    Ashley – If your company doesn’t use a broker and you have zero gain or loss, I think you will be OK with not entering anything.
89. Ashley Dunham on March 24, 2010 | permalink
    
     

    Thanks, TFB. In the future, I will do as you suggest and report the zero gain/loss transaction for sake of completeness. I just wish I had found your site sooner. Great info!
90. Anton on April 3, 2010 | permalink
    
     

    I have a question for ‘Sell to Cover’ case:

    Since the company already withholding some of my RSU stock for tax purpose (for example, I have 100 shared vested, but only getting 60 shares, 40 shares are withhold for tax ), why they still report the total vested share value in W2 accounted for tax again?

    Would this causing paying *double* tax?

    1) the 40 shares value witholding when the stock is vested
    and
    2) the reported RSU value report in W2 as wages

    Please clarify! thanks!
91. TFB on April 3, 2010 | permalink
    
     

    Anton – Think when your company pays you a $1,000 cash bonus and withholds $400 for taxes. What is reported on your W-2 for that bonus? $1,000. It will not cause you to pay *double* tax because the $400 withheld is also reported on W-2. It’s the same concept when your company pays you the bonus in shares instead of in cash.
92. Anton on April 4, 2010 | permalink
    
     

    TFB – Thanks for your explanation! So you mean once the RSU got vested, they will report the value of them as wage in W2, and also at the same time put the withholding tax in W2 (or in my pay stub) as well?
93. Anton on April 4, 2010 | permalink
    
     

    TFB – Never mind, I read again your reply and got the answer!
94. Cathy J. on April 7, 2010 | permalink
    
     

    Still not sure if I’m getting this right. Employer issued stock award (based on company’s performance prior year) on 3/31/08 and 3/31/09. Employer paid full value at time of award via paycheck and was taxed fully at that time on entire amount. Half of the award was given as cash compensation, and the other half was used to purchase shares of company stock, which was done by a broker, and the company put into an account under our name. Stock was fully vested when given. If I understand you correctly, the cost basis would be the price of stock on the date it was granted (3/31 each year). Let’s say full award was $500, which was fully taxed via paycheck; $250 was “cash” and $250 was used to buy company stock through broker, in our name, fully vested on 3/31. Would cost basis be the $250 value of stock purchased? (If so, would do this for value given each year…) We then sold all shares from 2008 and 2009 in 2009. Would I then take the sale price (split by how many shares given each year times their value at time of sale), minus/plus the cost basis, which would be determined as capital gain or loss?? 1099’s refer to this as Restructed Stock, but it was fully vested when given and the “restricted” part is confusing and doesn’t seem to fit exactly into anything I’ve read. Please advise. Thanks.
95. deepesh on April 10, 2010 | permalink
    
     

    TFB,
    On my W2, RSU is shown in box 12c with code V as total amount vested and I received a letter from broker showing the qty of stocks withheld for taxes and broke down in fed, state, soc, and medicare. Is this same as sell to cover and I should show zero gain/loss on sch D? Is RSU same as non-statutory stock option?

    deepesh
96. TFB on April 10, 2010 | permalink
    
     

    deepesh – RSU is not the same as non-statutory stock option. Code V in W-2 box 12c is for non-statutory stock options.
97. Cathy J. on April 10, 2010 | permalink
    
     

    TFB, for some reason you don’t answer my posts — I’m sorry if my questions don’t make sense to you. I’m really trying to understand all of this. I don’t know what to call it (RS, RSU ESO, or whatever, and no one I’ve asked seems to get it). All I know is that it’s referred to as an incentive award of half stock/half cash, and the entire amount shows up on paycheck and is taxed; half the company transfers to a broker who buys company stock in our name, and then it’s up to us what we do with it. The 1099-B says Restriced Stock Plan Account on top. I have read all the definitions of stock options, and none simply say that it is given in this way. They talk about vesting, etc,, but we wouldn’t have received award if we weren’t vested. You mention 3 choices (same day, sell to cover, cash transfer) — we weren’t given a choice so I don’t know how to categorize. It seems like it might be considered same day, but I have no idea. In Turbo Tax Deluxe, it asks questions, and confuses me further. Seems like I shouldn’t call it anything to do with an employee stock option, just treat it as if we bought stock ourselves, use cost basis as amount company gave us (bought for us through broker) to buy their stock, and then whatever date we sell would determine short or long-term sale. In our case, it would include both, and Turbo Tax wants me to split it. If I split it, then the numbers that appear on 1099-B won’t be identical to what I input, so that is really where I’m totally confused. I don’t know how to make numbers match since there are dividends which were reinvested and fees, all of which won’t show on my 1099-B. Please answer my questions. Even if I’m an idiot, please just let me know that you can’t help me because I don’t know enough on subject… thanks.
98. Cathy J. on April 10, 2010 | permalink
    
     

    P.S. Turbo Tax says to treat as two different sales and split into how many shares were bought (44 first time 81 second time), but they were all sold same time (130.0677 shares) — so if I do that, none will equal amount on 1099-B, if that makes any sense at all. Sorry I’m so confused.
99. TFB on April 10, 2010 | permalink
    
     

    Cathy – I didn’t answer your question because I don’t know enough about it. From what you described, it does not sound like a typical RSU program. So the company gives you a sum of money, let’s call it $10,000. It’s just like a cash bonus. It’s taxed. Where does the tax withholding come from? Presumably from the cash portion? So they send $5,000 to the broker to buy shares and you end up with the shares plus ($5,000 minus tax withholding) in cash? If that’s the case, it has little to do RSU. It’s just straight buy-shares-with-cash.

    Your basis in these shares are the total cash you spent on buying the shares plus reinvested dividends. You have to separate the lots into short-term and long-term. List all your purchases and dividend reinvestment by date, # of shares, $$.

    xx/xx/xx bought 44 shares with $??
    xx/xx/xx bought ?? shares with dividend of $??
    xx/xx/xx bought 81 shares with $??
    xx/xx/xx sold 130.0677 shares for $?? (1099-B)

    Draw a line at the one-year from date-of-sale mark. Allocate your sales proceeds proportionally to the number of shares. Holding period shorter than 1 year is short-term. Longer than 1 year is long term.
100. deepesh on April 11, 2010 | permalink
     
      

     If RSU is not same as non-statutory stock option then I don’t know why the RSU amount is shown in box 12c under Code V on my W2. I know it is RSU b/c broker’s statement says that and that is what I got from my company.

     What do you show on ur return, non-statutory stock option or RSU? I used RSU sell to cover method on my tax return.
101. TFB on April 11, 2010 | permalink
     
      

     deepesh – I don’t know why your employer included RSU vesting amount in W-2 box 12C. My employer didn’t. The amount is just in box 1. If you are sure it’s RSU, then it is. Whether you have zero gain/loss for your sell-to-cover depends on at what price you sold the shares and whether you paid any commission or fees when you sold.
102. Paul W on April 15, 2010 | permalink
     
      

     TFB, I filed before reading the posts. My employer did a sell-to-cover.
     There is no 1099B entry for this and the vested amt is on W2.
     I didn’t put this on Sch-D because there is no 1099B and I thought employer did the sale.

     Would IRS know this and consider this my sale?
     Should I be concerned about this now that the tax has already been sent out.
103. TFB on April 15, 2010 | permalink
     
      

     Paul W – In that case don’t worry about it. See comment #88.
104. misshippy on July 6, 2010 | permalink
     
      

     RSU question–Sell to Cover– If the company did not sell enough shares to cover the taxes then finds the error what happens now? Do I pay in check or do they deduct my paycheck?
105. TFB on July 6, 2010 | permalink
     
      

     misshippy – The withholding is just an estimate, not any different from the withholding on your salary. If the withholding is insufficient, you will have to make up the difference at tax filing time. You may owe underpayment penalty and interest as well if the withholding is drastically insufficient. If the company wants to withhold more now, ask them how they will do it. They will likely deduct your paycheck.

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