Your blanket statement as to "what happens" when RSUs vest doesn't cover all possible situations.
When RSUs vest, that vesting creates compensation based on the GROSS number of shares vesting. "Compensation" requires "withholding", and there's 4 ways of getting the cash to pay those taxes:
- The company may "withhold" some of the shares, paying the taxes with the company's money.
- Some amount of the shares can be sold via a "same day" sale, through a broker, and the broker sends a 1099-B to the employee. (The instant the RSUs vest the employee owns the stock and only the employee can sell the stock.
- Some amount of the shares can be sold via a "same day" sale, through a broker, and the broker doesn't send a 1099-B to the employee, but is obliged to prepare a "statement" providing the same information.
- The employee reaches into his pocket and pays the taxes.
In situation 4. the employee actually ends up with the GROSS amount of shares vested. In all the other situations the employee ends up with a "net" number of shares, the difference being the shares withheld/sold for taxes.
The ONLY way the IRS can be alerted that shares were sold for taxes is in situation 3., a 1099-B is issued. If that happens and the employee doesn't report the sale then the IRS will make inquiry about the missing 1099-B, and I'd expect that's the situation you face.
Although you could amend and maybe garner a small refund due to a (typically) small loss on the "same day" sale, if you don't want to do that simply explain the situation to the IRS - RSU vesting/same day sale/booking the trade would show a small loss - and that should be the end of it.
