First, let's explain how and why taxes are withheld from shares of stock by your employer. Income taxes are withheld upon delivery. Many companies automatically sell your shares to cover the tax withholding without giving you a choice. Some companies may offer you different ways to pay withholding taxes including but not limited to paying by personal check or deducting from your paycheck directly. Usually the amount of income taxes that are withheld for any purpose are reported on a W2.
Now in the end, your total W2 withholdings(including what was withheld for the shares of stock) are reported in Box 2 of your W2. As a result, your total tax liability is reduced by all income tax that was withheld by the employer. So the income tax that was withheld from the shares has already been reported.
Now, selling shares of stock for whatever reason is taxable income whether it be a long term capital gain or a short term gain. This will increase your tax liability in your return but remember the tax that was withheld by your employer is already reported in your W2 for the year and is reflected in Box 2 of the W2 that reports ALL income taxes withheld.
@HerpDerpson
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