Restricted Stock Units (RSU) Sales and Tax Reporting

February 25, 2008 by TFB

RSU stands for Restricted Stock Units. It's the new form of stock-based compensation that has gained popularity after the employers are required to expense employee stock options. The biggest difference between RSUs and employee stock options is that RSUs are taxed at the time of vesting while stock options are usually taxed at the time of option exercise. The employer is required to withhold taxes as soon as the RSUs become vested.

In a previous post, Restricted Stock Units (RSU) Tax Withholding Choices, I wrote about what I chose among the three tax withholding choices — same day sale, sell to cover, and cash transfer — and why. This time I'm writing about how to account for taxes on the tax return, especially if you use tax software like TurboTax or TaxCut.

I'm going to use this simple example:

Suppose you had 100 RSUs vested on October 31, 2007. The closing price of the stock on that day is $50, and the tax withholding rate is 40%.

Regardless of which choice you made for tax withholding — some employers don't give you a choice and sell to cover is your only option — your employer will include on your W-2 as wages the total value of the vested RSUs. In our example, it's $50 * 100 = $5,000. They will also withhold the same amount of taxes regardless of your choice. In this example it's $5,000 * 40% = $2,000. How you account for taxes on your tax return for the rest will depend on your tax withholding choice.

1. Same Day Sale. If you make this choice, you sell everything. Let's say on the day after the vesting date the shares are sold at $50.10 per share, less a $20 commission and $1 SEC fee. You total proceeds before tax withholding is $50.10 * 100 – $20 – $1 = $4,989. The employer withholds $2,000. You are left with $2,989. At tax time, you will receive a 1099-B from your broker listing the stock sale proceed of $4,989. You enter in TurboTax or TaxCut, or on Schedule D of Form 1040:

Description: 100 shares XYZ, Inc.
Net Proceeds: 4,989
Date of Sale: 11/01/2007
Cost Basis: 5,000
Date Acquired: 10/31/2007

Your cost basis is the amount your employer included on your W-2, which is the closing price on the vesting date times the number of shares vested. In this example, you will show a short-term loss of $11 on your tax return because of the brokerage commission and the SEC fee. The income and the associated tax withholdings are already included on your W-2. Use those numbers as-is.

2. Sell to Cover. [Update on April 9, 2008: I wrote a follow-up post RSU Sell To Cover Deconstructed to clarify this option. Jump ahead to that post if you'd like.] If you make this choice, or if you don't have a choice, your employer sells just enough shares to cover the tax withholding. Using the same numbers as in same day sale, they sell 41 shares. The SEC fee is a bit less, say $0.40. You receive from the sale $50.10 * 41 – $20 – $0.40 = $2,033.70. The employer takes away $2,000 for tax withholding. You are left with $33.70 in cash and the remaining 59 shares. At tax time, you will receive a 1099-B from your broker listing the stock sale proceed of $2,033.70. You enter in TurboTax, TaxCut, or on Schedule D of Form 1040:

Description: 41 shares XYZ, Inc.
Net Proceeds: 2,033.70
Date of Sale: 11/01/2007
Cost Basis: 2,050
Date Acquired: 10/31/2007

Once again, your cost basis for the shares you sold is the amount your employer included on your W-2 for those shares, which is the closing price on the vesting date times the number of shares you sold for tax withholding ($50 * 41 = $2,050). After the sale, you show a short-term loss of $2,050 – $2,033.70 = $16.30 because of the brokerage commission and the SEC fee. Again, the income and the associated tax withholdings are already included on your W-2, and you just use those numbers as-is.

For the remaining 59 shares, you keep a cost basis of $50 per share ($50 * 59 = $2,950). You have to remember this number until you sell the remaining shares. Whenever you sell them, you enter in TurboTax, TaxCut, or on Schedule D of Form 1040:

Description: 59 shares XYZ, Inc.
Net Proceeds: whatever you sell them for, copy from 1099-B
Date of Sale: your date of sale
Cost Basis: 2,950
Date Acquired: 10/31/2007

You will show a short-term or long-term gain or loss for these remaining shares depending on your date of sale and the sale price.

3. Cash Transfer. If you make this choice, you give your employer cash for the tax withholding and keep all the shares. You can sell the shares either immediately or keep them for however long you like. The tax accounting is the same as if you bought the shares at the closing price on the vesting date. Whenever you sell them, you enter in TurboTax, TaxCut, or on Schedule D of Form 1040:

Description: 100 shares XYZ, Inc.
Net Proceeds: whatever you sell them for, copy from 1099-B
Date of Sale: your date of sale
Cost Basis: 5,000
Date Acquired: 10/31/2007

You will show a short-term or long-term gain or loss for these shares depending on your date of sale and the sale price. The income from RSU vesting and the associated tax withholdings are already included on your W-2, and you just use those numbers as-is.

That's all. Hope this is helpful to someone looking for info on the tax treatment and implications of RSU sales.

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Comments

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

  1. Anonymous on February 27, 2008 | permalink
    2.  

    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
    3.  

    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
    4.  

    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
    5.  

    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
    6.  

    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
    7.  

    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
    8.  

    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
    9.  

    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
    10.  

    Very helpful. I was lost in TurboTax until I read your post. Thanks so much.

  10. Anonymous on March 11, 2008 | permalink
    11.  

    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
    12.  

    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
    13.  

    Just wanted to say thanks. Your write up was very helpful. Thanks again!

  13. Anonymous on March 27, 2008 | permalink
    14.  

    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
    15.  

    @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
    16.  

    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
    17.  

    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
    18.  

    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
    19.  

    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
    20.  

    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
    21.  

    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
    22.  

    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
    23.  

    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
    24.  

    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
    25.  

    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
    26.  

    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
    27.  

    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
    28.  

    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
    29.  

    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
    30.  

    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
    31.  

    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
    32.  

    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
    33.  

    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
    34.  

    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
    35.  

    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
    36.  

    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
    37.  

    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
    38.  

    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
    39.  

    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
    40.  

    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
    41.  

    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
    42.  

    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
    43.  

    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
    44.  

    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
    45.  

    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
    46.  

    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
    47.  

    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
    48.  

    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
    49.  

    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
    50.  

    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
    51.  

    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
    52.  

    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
    53.  

    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
    54.  

    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
    55.  

    kate – No. That's what this entire post is about. Please read it in its entirety.

  55. Tom on March 4, 2009 | permalink
    56.  

    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
    57.  

    Tom – It's possible but only your employer knows for sure.

  57. Ali on March 17, 2009 | permalink
    58.  

    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
    59.  

    @Ali – You do nothing.

  59. Paul on March 22, 2009 | permalink
    60.  

    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
    61.  

    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
    62.  

    @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
    63.  

    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
    64.  

    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
    65.  

    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
    66.  

    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!

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