Stock Sale - RSU's or Normal shares?

[drs1414]

Stock sale question.  My employer gives a yearly bonus and 50% of the bonus is required to be in RSU's (restricted stock units).  It usually takes 1 to 5 years for the RSU's to "vest".  Meaning I do not do anything w/ the RSU's until they are "vested".  When the RSU's are vested, I am provided w/ a sheet (not a tax form) that details how many shares were withheld for taxes in the act of vesting. For example, if there are 14 RSU's, when they vest my employer may withhold 6 shares for taxes and then that leaves 8 shares deposited to my account.
Questions for when I sell all or a part of the 8 "vested" shares:
(1) Turbotax is asking if these 8 shares that I sold were part of an employer plan, do I choose yes or no?
(2) if the answer to question #1 is yes, do I have to provide any info w/ the sale of the 8 shares about the taxes that were withheld (14 shares minus 6 shares for taxes leaves the 8 shares)
(3) Once RSU's vest, are they still considered RSU's or is it considered just normal stock shares at that point?
In summary, my main overall question is .. since the shares I sell are "vested", do I report the sale as if it never was a part of an employer type plan (meaning just a basic stock sale)? Or do I have to involve the tax info that was involved prior to getting to the # of vested shares.  I never do anything w/ the RSU's until they are fully vested.

[RaifH]

1. Yes, you do want to report these as an RSU stock sale. 

2. The sold shares should be used to cover the taxes for 2021 and the sale will be reported on a 1099-B, as well as the federal income tax withheld from the sale. Your 8 remaining shares will not be reported until you sell those as well. The taxes withheld for this year should cover the acquisition of those shares.

For example, 14 shares of your company vest this year. They are each worth $100 when they vest and 6 are automatically sold to cover the taxes. Your W-2 should have an extra $1,400 to reflect the RSUs in Box 1 Wages. The $600 from the sale reduces the extra tax burden on receiving an extra $1,400 in income.

If at a later date these shares increase to $150 and you sell them, you will still have to recognize the $400 of income as capital gains (150-100 x 8 shares).

3. For purposes of filling out your tax return, I would still answer Yes and consider them RSUs in TurboTax. While your broker should automatically adjust the cost basis to the value of the stock on the date that it vests, you will want to keep any supplemental information to document the basis and adjust it if needed on any future 1099-Bs. 

For more information on RSUs and how to report them, please see this TurboTax article.

[RaifH]

[Duplicate posting deleted]

[drs1414]

I'm confused.  I probably did a poor job with wording in the asking of my question. 

As a part of vesting, the plan administrator either retains or sells shares for tax purposes.  To my knowledge when that happens the info shows up in my W2 for the year the vesting occurred.  So, in my example above, this would have been related to the 6 shares for tax purposes dealt with by the plan administrator.  Since its in my W2, I do not have to report any "sale" related to this correct b/c any sale wasn't done by me?   I can't do anything w/ RSU's anyway .. I can only transact w/ the number of shares deposited in my account from vesting.

My main question was about the 8 remaining shares b/c these are the only shares that I can do anything with.  The original 14 shares, I couldn't touch them or do anything w/ them until they vest.  So, at the end of the day, all I have access to is the 8 shares.  So if I sell the 8 shares after they vest, I don't have to report anything related to the 14 rsu's and the 06 shares for tax purposes b/c it was already reported as income on my w2 when it vested ... all I have to do is report the sale of the 8 and cost basis and sold price correct?

I apologize for my ignorance if I am misunderstanding this issue.

[RaifH]

Yes, at this point your 8 remaining shares are treated like any other stock and you will realize either long or short-term gain or loss on them. The total value of all 14 shares, including the ones that sold before you got your hands on them, should be included in your wages on your W-2 for this year. Box 14 on your W-2 may have an entry that declares the total value of all the shares that vested in 2021. The six that were immediately sold for tax purposes will be reported separately on a 1099-B, but this should not result in any additional tax. Since they are sold immediately, they should sell for the same price as they vested for. There might be a small loss if you have to pay any fees on the sale. Even though this will not impact your taxes, if you receive a 1099-B for the shares withheld for taxes, you will want to report it on your tax return. 

A potential issue arises when you are selling the remaining eight shares. Sometimes, the cost basis for these shares needs to be adjusted when you sell them. That is why you want to hang onto your records for this year. The supplemental information included with your 1099-B should provide the cost basis for your RSU stock. Also, if there is an amount in Box 14 related to the RSUs, that amount is your total cost basis for all shares that vested this year. In our example, $1,400 would be reported in Box 14 as "Other" or something similar. There is no standardized entry for this box. That would indicate the basis for all your shares is $1,400, and your basis per share is $1,400 / 14  = $100. So if you later sold the 8 remaining shares, your cost basis will be $800. 

I hope that clears things up or at least doesn't muddy the waters further!