Does W2 Box 1 include RSU income though shares were already withheld?

[jackkgan]

When my RSU shares vested, I received lesser shares from my employer as the remaining were held back  to  cover for taxes.

But I see my W2  income box 1 seems to be much higher than my base salary.

1. Please confirm if the RSU shares*value on vesting date are also included in my W2 box 1 though the shares to cover taxes were already withheld.
2. Please help me understand if Box 14 Other :RSU has the amount as above or if that is different.

For example :

• If I was granted 100 RSUs in Jan 2023. Market price = $200
• Those 100 RSUs vested in June 2024. Market price = $400.
  
• My employer gave me only 80 RSUs in June 2024 as the remaining 20 were withheld for taxes.
  
• I sold the 80 RSUs in June 2024 right away.

Questions:

1. So does my 2024 W2 box 1 include  (80*400) or something else?
2. Would my 2024 W2 Box 14 RSU also include (80*400) or how is this different?

Thank you!

[DianeW777]

Yes, the full value of RSUs is included in your wages, including the ones cashed for your federal withholding, both are included in your W-2.

The cost and sales price of the shares sold to cover your federal withholding should be reported to you on a 1099-B. See the detail below for more information.

There is no double taxation because you will adjust your cost basis for the sales. 

• The buy and sell will be basically the same dollar amounts due to the sale occurring when you were awarded the shares. (Income reported on your W-2, as well as federal withholding paid for you).  
• The income reported in you W-2 is the amount that becomes your cost basis (and any money you might have paid as a discounted amount for the shares).
  • Example Scenario: 10 shares sold will have a $100 (assumes $10 per share) cost basis for you and same sales price (amount awarded plus any discount cost to you, if any)  the balance, $200, will be the cost basis of the ones you still hold (assumes a total of 30 shares)
• What are RSUs/PAUs and how do I report them?

[jackkgan]

Thanks  DianeW777 

Appreciate a bit more specifics to understand clearly.

For example :

• Say, I was granted 100 RSUs in Jan 2023. Market price = $200
• Those 100 RSUs vested in June 2024. Market price = $400.
  
• My employer gave me only 80 RSUs in June 2024 as the remaining 20 were withheld for taxes.
  
• I sold the 80 RSUs in June 2024 right away.

Questions:

1. So does my 2024 W2 box 1 include  (80*400) or something else?
2. Would my 2024 W2 Box 14 RSU also include (80*400) or how is this different?

Thanks again!

[DianeW777]

The information provided is based on your example and numbers.

The sale by your employer for your federal withholding would be the value on the vesting date times the number of shares sold to cover your tax withholding for the shares that were fully vested. The employer sold 20 shares x $400 per share = $8,000 and included that amount in your federal withholding on your W-2.

The full amount of the shares on the vesting date is included in your wages on your W-2. 

• RSU compensation is taxed as ordinary income (W-2 wages) when the shares vest and based on your shares' value on the vesting date. In your example the additional wages are $40,000 (100sh x $400/per share). This should be the amount in box 14.

The amount included in your wages (the full amount) is your cost basis for the shares you sold. When you enter your sales (both the ones sold by your employer and the ones sold by yourself) you will enter this cost basis to reduce or eliminate any gain on the sales. Your sale will be short term because you did not hold the shares for a long term period.

Holding Periods:

• Long term is a holding period of more than one year (one year plus one day) and receives capital gain tax treatment (0%, 10%, 15%, 20% depending on your regular rate of tax)
• Short term is a holding period of one year or less and receives ordinary gain tax treatment (your regular rate)

@jackkgan