@TomYoung Thank you for your reply - this was very helpful. The only thing I'd add is that the main confusion comes from which FMV value to use for calculating the cost basis as there are a couple of options. Would you please review my understanding below to see if I am tracking correctly?
When an RSU vests, the company reports the earnings, and associated taxes withheld, on the W2 as this is treated as regular income. Say 100 RSUs vest on a date when the market value per unit is $10. Then your W2 reports income of $1,000 (100 x $10). The company also withholds ~40% of the 100 RSUs to pay off taxes, leaving you with, say, 60 RSUs in your accounts worth $600 on that day. This event does NOT get reported on the 1099-B.
When you eventually sell these RSUs, that event is then recorded on your 1099-B and you then pay gains (or losses) based on the value you sell the RSUs for minus the $10 cost basis on the date of vesting. So, if you sell the 60 RSUs for $15 each after 6-months, your 1099-B will show proceeds of $900 minus fees. If the cost basis is missing, you then fill in the cost basis as $600 (60 x $10 value at vesting), giving you a net gain of ~$300. You also report this as short term gain as it's not been a year since vesting.
For SSARs, the process is very similar. When you exercise, the income (and associated taxes) reported on your W2 is the difference between market value on day of exercise and strike price (a weighted average if you are selling multiple lots in one transaction). For the 1099-B reporting, the income is "backed into" the number of RSUs the income results in based on that same market value, minus any transaction costs. If cost basis is not filled in, you use that market value as your cost basis (not the strike price), which results in a small loss due to the transaction costs (loss of magnitude of $10s to $100s). These are always reported as short term transaction on the 1099B as everything happens on the same day.
As an example, if 200 SSAR units are exercised with market value of $10 and strike price of $5, then the income and taxes reported on W2 are for $1,000 [200 x ($10 - $5)]. Then the 1099-B reports 100 RSUs sold for $1,000 (minus transaction costs). The cost basis, if not filled in, is still $1,000 based on the market value (and not the strike price of $5). This should result in a "loss" due to transaction costs.
To say it another way, SSAR sale and RSU sales are similar in that the initial "vest" income and associated withheld taxes are reported on the W2 (difference being that with SSAR you choose the date of "vesting / exercising" vs. RSUs which vest automatically). Then the sale of the resulting shares are what show up in the 1099B, the cost basis for which are the FMV on the date of the "vest".
Is that the right way to think about it?
