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hr1729
New Member

RSU vested: both income and taxes already in W2

I have a RSU grant of 100 shares that vested. 42 were sold by the broker immediately to cover for taxes, and I own the rest 58 (I haven't sold them.)

W2 income reported: includes the total value of 100 shares as income.
W2 tax withheld: the value of 42 shares sold was withheld as taxes.

The broker 1099-B reflects the sale of 42 shares to cover for tax withholding?

Q: Do I have to report anything at all? The W2 income and taxes withheld already cover it, and I haven't sold any other share.

Thanks!
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Accepted Solutions

RSU vested: both income and taxes already in W2

No, the broker won't issue a 1099-B for the sale of the shares to pay taxes. Those shares are simply withheld. And you didn't sell your remaining shares, so I don't think you have to do anything at all, outside of the W2.

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11 Replies

RSU vested: both income and taxes already in W2

No, the broker won't issue a 1099-B for the sale of the shares to pay taxes. Those shares are simply withheld. And you didn't sell your remaining shares, so I don't think you have to do anything at all, outside of the W2.

hr1729
New Member

RSU vested: both income and taxes already in W2

Roger, many thanks! I guess that is the source of my confusion -- etrade sent a 1099-B that has entries for the sale (to cover for taxes).

RSU vested: both income and taxes already in W2

Hmmm. That's interesting. I had the exact same scenario, and my broker didn't include the sale of withheld shares on the 1099-B. But that was before the new cost basis reporting rules went into effect. I think you should enter the 1099-B, since you received it, and you always need to enter those. If the cost basis is the same as the sale price, then there is no net gain or loss, and won't trigger any capital gain or loss. I think that is the correct way to do it. Be sure to check the box under the 1099-B line that is labeled "Additional Details", then Start. This will ask you if the sale is for stock options, and the type of option.
SeanDC
New Member

RSU vested: both income and taxes already in W2

I have a related question.  My wife received RSU's which vest in December.  A portion of the shares vested were withheld to cover taxes.  Her W2 shows the RSU's as income, but I cannot confirm that the shares withheld to cover taxes (both Fed & State) are captured in the W2 as well. I received a letter from her employer showing RSUs vested and shares withheld, but this is not an IRS form and there is nothing that states the amount withheld for taxes is represented in the W2. Any help is appreciated.

RSU vested: both income and taxes already in W2

There is usually nothing that states that taxes were withheld on W2, but they almost always are. Check your broker statement that shows the vest transaction. It should show the dollar amounts that were converted for tax withholding. If in doubt, contact your employer.
jimannan
New Member

RSU vested: both income and taxes already in W2

This topic is very confusing. I elected to sell-to-cover and understand that the taxes have been paid. I don't see that reflected on the W-2 anywhere (itemized?).  Am I to assume the the Federal Income Tax withholdings number on the form includes the sale of stock to cover taxes?

RSU vested: both income and taxes already in W2

What does Roger mean by - 'don't have to do anything outside of W-2'. Does that mean we don't have to fill out the stocks, mutual funds etc. if these vested stocks were not sold? Investopedia states it is considered as income and has to be reported

RSU vested: both income and taxes already in W2

I think Roger is correct, that you don't *have* to do anything outside of your W2.  But if you wish to have a clear record of the cost basis for the unsold shares, say for your estate should you die, you would then report the sale on your Schedule D column E.  An executor can get this information but it is time consuming and difficult and is compounded should you ever change brokers.  

RSU vested: both income and taxes already in W2

If the company is public, the value of your RSU is categorized as short term gain (income) on the day you received it.  You owe tax on that amount.  You will owe tax at your total tax rate, and it should be paid with your quarterly estimate.  Here's where it gets hard to do.  The company you work for has decided on a policy of what percentage of your RSU is withheld for taxes.   You don't have a choice in the matter.  But you still owe the tax.  So say your income is 50,000, and you get an RSU that's worth 50,000 at vesting, your tax rate went from say 23% up to 32%.  You owe the tax difference on the first 50,000 income.  OK, it gets harder.  RSUs are often granted more than once per year.  So you should look at your RSU grant schedule, assume you're going to receive it all, and estimate your tax accordingly so you don't end up with a whopping payment and potential penalty.  If you don't do this, TT will calculate a penalty for you.  You can get your grant schedule from your fiance department.  The difficulty isn't over yet.  The company has a policy on how much to withhold.    I know one company that decided on 33%, and one company that decided o 42%.  Neither number will be right for anyone granted an RSU.  You have to do your own.   If you are over-withheld, you will get the money back from the IRS in your refund check.  If you are over-withheld too much, there will be a penalty, so don't forget you can adjust your withholding amount so it comes out pretty close.  If you are under-withheld, you will have to write a check when you file your taxes, and again, TT will calculate your penalty.  And one commonly misunderstood concept is that your broker will *not* issue a 1099 for the shares withheld, since they are not sold, but their value has been dumped into your W2 income and tax buckets by your company.  Your broker will never see those shares. You can get the percentages for each bucket from your finance department, but really, you don't need to care about that level of detail.  Unless you work in the tax squad in your company's finance department.  And don't worry about your company, because they are getting a great deal on this whole thing.  The money they dump into your tax bucket comes from profits, which lowers their taxes, and the shares that are withheld get dumped into the stock reserves bucket, which of course isn't taxed because those shares aren't sold.  But they can be used for future RSUs, ESPPs, grants, loan collateral, lots of things just so long as they don't get sold.  And don't worry about future sales of your leftover shares at your broker's.  Your broker knows the value of those shares was the value when you received the grant, and the tax is paid on that value already, so if the stock goes up, you simply have to pay the tax on the sale value less the value when you received the shares.  You can use TT for that; as well.  Where this gets complicated is with FIFO, the shares you sell are from the oldest bunch of stocks you put into your account, which may be years ago, and you have to come up with all that tax money.  It gets even more complicated when you change brokers, because the new broker isn't going to have a clue as to what the value of the stock was when you got it, so (I believe this to be the case but needs checking) they assign a value of 0.   I only changed brokers once in my life, many years ago, and had the first of my 5 heart attacks when I opened that 1099......So keep records, and understand the paper you're keeping.  I will stake my professional reputation (such as it is) on two things:  One is that you will never see a 1099 from your broker covering RSU shares withheld for taxes, and if you see the total number of RSU shares granted being received by your broke on your vesting day, you can rest assured that your CFO is not long for that position

RSU vested: both income and taxes already in W2

Sean, you can verify this information.  Take her earnings statement for the period prior to the vest, the period of the vest, and the period after the vest, and you should see the numbers for the tax buckets change; depending on the detail in her earnings statement, you will see differences in the Federal, Federal Supplemental, Medicare, Social security (unless she's maxed out), State, and SDI if you have that.  Or you can go to your finance department, ask the admin to point you to the person responsible for RSUs, and that person can run the report for each vesting in about 10 seconds or less.  But I don't think you need to worry about that; taxes get paid or people go to jail.

RSU vested: both income and taxes already in W2

In case anyone was in my situation. My RSU broker did send me a 1099-B for sell-to-cover stocks and indicated the cost basis was 0.  After a lot of research, I realized they also included a supplemental page with an adjusted cost-basis which is what is needed to input (not as the original cost basis, but as an adjusted cost basis) bringing the short-term gains to 0.

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