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

By: CDS

CDS — Tue, 13 Dec 2011 21:04:49 +0000

I determined the reason for the difference, and I’m not sure the company’s tax treatment of reported income is correct. The company sells whole shares, and sells fewer than needed, creating a tax “liablility”. For instance, for one RSU vest event, they sold two shares (out of 6), getting $96 in proceeds, with a tax liability of $102. They then reduce the reported W-2 RSU income by the $6 difference, so instead of reporting income/cost basis as (remaining shares * sales price), they are reporting (remaining shares * sales price) – “tax liability”. I can’t quite figure out what’s going on with this $6 tax liability, but I don’t think it belongs in the cost basis of the remaining shares.

By: TFB

TFB — Tue, 13 Dec 2011 18:25:22 +0000

@CDS – If you have the paperwork from your employer, use your employer’s.

By: CDS

CDS — Tue, 13 Dec 2011 17:27:42 +0000

Great website, very helpful. I’ve found myself in the camp of needing to answer an IRS audit due to not properly filing a Schedule D for a sale. Quick cost basis question for RSUs (in a net issuance situation. Your guidance indicates using the closing price of the stock on the day it vests for the cost basis of the remaining shares after net issuance. I have a date of 5/17, and using the closing price and number of shares, calculate a cost basis of 3152.50. On the vest date, the company issued a paycheck stub, with gross amount, taxes paid, and a net income amount reported as “RSU” (also included in W-2 income), which is different than my calculated cost basis. Must I use the “RSU” income amount as cost basis, or is my calculated cost basis using closing price (which is slightly higher) fine?

By: AK1

AK1 — Fri, 21 Oct 2011 13:13:12 +0000

Thanks for your informative article. I have a question (apologies in advance if it’s super basic). In relation to RSUs, when are shares deducted from the number of available shares — are the shares deducted when the RSU is granted, or at the time the RSU vests?

Thanks much!

By: zev

zev — Tue, 28 Jun 2011 16:54:44 +0000

Thank you very much for your informative article. I just have one question. How does the IRS value restricted stock paid to non-employees? i was just paid in restricted stock, and im not sure how much i need to pay tax on. The amount the stock was when recieved, or what the stock is at now. (even though at this point i cant sell it)

By: Kbiz

Kbiz — Tue, 03 May 2011 17:28:11 +0000

I am not charging the client for anything – not preparing a tax return nor providing a fee for service. Was just looking for clarification…no problem for not answering…

And, thanks, you do have an informational site…

By: TFB

TFB — Fri, 29 Apr 2011 00:32:37 +0000

@Kbiz – I will tell you if you share some of the money your client pays you. Charging your client money for an answer you get from me for free isn’t fair.

By: Kbiz

Kbiz — Fri, 29 Apr 2011 00:07:34 +0000

In reviewing a paycheck from a client, it shows Restricted Stock gross income as $371,000. An after-tax deduction called “Restricted Stock Offset” equals $235,000. Does this $235k represent the tax w/held on the transaction? Not clear how it figures into the calculation.

By: JCA

JCA — Thu, 28 Apr 2011 15:29:29 +0000

Still a little confused. My employer issues RSUs to me and seems to use the “Net Issuance” method to cover the taxes. I can infer this because my 1099-B does not have anything related to the RSUs. Every April, I get a chunk of RSUs, let’s say 300. About 1/3 are sold to cover taxes, say 100 shares. So to me, I am just getting issued 200 shares of stock. The value of 300 shares is reported as income, and the value of 100 shares is withheld as tax. OK all that is fine. Now within 30 days of the RSU issue, let’s say I sell a chunk of totally unrelated shares in the same company, at a loss. Let’s say I sell 200 shares at $10, and $5 of that is loss, so $1000 of loss. Let’s say the RSUs that were issued to me were at $10, or a value of $2000. According to IRS Pub550, wash rules are incurred when I “Acquire substantially identical stock or securities in a fully taxable trade” within 30 days of the sale. Does my company’s issuance of RSUs to me count as the “acquire” statement? If so, do wash rules apply? If so, when do I get to claim the loss?

By: TFB

TFB — Mon, 18 Apr 2011 17:59:22 +0000

@LAB – Sorry I have zero experience on the employer side. From my observation as an employee, sell-to-cover includes necessary amount for federal, state, SS, Medicare, and state-mandated disability program (if your state has one), just like a one-time cash bonus except no deduction for 401k contributions.