Reward stock units and a sale back to the employer

[someguy12345]

Hello,

Last year I've received a RSU reward of stock of the company I work for. The value of the reward (from the vesting day) has been reported by my employer on my W2. I did however decide to receive a cash equivalent instead of the actual stocks. So instead of stocks the company transferred certain amount in USD to my bank account. The amount corresponds to the W2 amount (value of vested stocks). So far so good...

The problem is that the company finance guys tell me that from the "actual events" perspective I did receive stocks (so vesting took place) and then immediately I sold those stocks back to company for the same value (and the $$$ have been transferred to my account). The tax person in the company says that in such case I should not only report the W2 income (the reward, which is kinda obvious) but also report the sale of the stocks without change of value (so basically cost basis = proceeds, no profit/loss) as this is what happened.

The situation may or may not be complicated by the fact that my employer is an international company with the main "location" in Europe and while I am hired by an American company, I work in the US, I get W2 etc (as we have a proper structure in the US) the stocks are not traded in the US and I haven't received any kind of 1099 for this "no-income" transaction. It was not traded on the regular stock market anyway so probably even if everything happened "in the US" it wouldn't matter.

My questions:

1. Should I report this (by the looks of it paper-only) no-income transaction in my taxes? I am talking about the sale and not the W2 reward (vesting) as it's obvious that I must report and pay taxes on that part.

2. If yes, should I just "input" it manually with cost basis = proceeds = actual value of the reward which is on W2 (and landed on my account)?

3. If yes, should I report it as non-covered / 1099 not sent to IRS kind of transaction>

4. Does it change anything that the company is in Europe (no taxes paid there)?

5. Anything else I should do/consider?

Thank you!!! 

[GeorgeM777]

Question 1 - Because your company told you--you might consider confirming your conversation with them in an email--that the RSUs actually vested and were sold same day for no gain/no loss, then go ahead and report it on your return.  Report it as you suggested, that is cost basis equals sales proceeds for no gain/no loss.

Question 2 - Yes, because this involves just one trade (or even if it were a few trades) enter your information manually into TurboTax. Transactions of this type get entered in the Investments and Savings section of TurboTax online or in the Investment Income section of TurboTax CD/download.  

Question 3 - Yes, given that the shares are not publicly traded on a US exchange, and no US broker was apparently involved in the transaction, report the sale as non-covered.

Question 4 - No, we assume you are a US citizen and therefore, you pay tax, if any, to the US Dept. of the Treasury.  The US has various tax treaties with other countries that deal with issues where US citizens work for companies based in other countries.  The situation might be different if you, as a US citizen, lived in a foreign country and worked for a foreign company.

Question 5 - No, it appears you have a very good understanding of what needs to be done from a tax perspective.  

[someguy12345]

Thank you George,

Few notes:

- I have an email confirmation and excel sheets with calculations done by the company which confirms the order of events. It doesn't look super official (like 1099 does) but I cannot hope for anything more. I guess it will need to do in the case of audit 🙂

- I am actually not a US citizen (yet) but a Permanent Resident but from tax perspective it does not matter at all. I am a "US Person" when it comes to taxes.

Thanks again!

[GeorgeM777]

While the email and spreadsheet are different than a 1099-B, it's at least some record of the transaction(s) at issue.  Moreover, it was prepared by company staff presumably knowledgeable about your RSUs and how you should report them.  Given those facts, your tax approach seems entirely reasonable. 

@someguy12345