PSU & RSU Listed on W2 & 1099-B

[alek]

Hi,

For the RSU portion when I complete entering all of the transactions on my 1099-B I get asked the following question:

"On X Form W-2 from X Company check that the following employee stock plan amount were included in Box 1 wages

• Stock Plan Type - Restricted Stock Units (RSU)
• Amount We Computed - $XX,XXX
• Is this income included in wages? - Yes

However, my W2 lists the PSU value granted and my 1099-B lists the shares sold to cover taxes.

When I am entering the 1099-B information I get asked the following question: What type of employee stock is this? My only option to select since its a PSU - Performance Stock Unit is None of these

The question I have is the following - since this is reported on my W2 but when entering the 1099-B info there is not a similar question as to when you enter the RSU portion is this the correct way to enter this transaction? Or Is there an additional reporting step I need to take here?

[LindaS5247]

You should select RSU's for your Form 1099-B because they have the same tax treatment (RSU's & PSU's).  

When you receive an RSU award, you don't actually own the stock until it vests. Accordingly, there is nothing to report at the time of the award.

Once the stock has vested, the fair market value of the stock gets reported as ordinary income, usually in box 1 of your W-2. In some companies, employees can earn dividends from unvested RSUs—these are also reported in box 1 of their W-2 forms.

After vesting, you own the stock outright. Should you later sell those shares, you'll get a 1099-B, which will report the gain or loss from the sale.

Another way you could do it is to because there is no "income tax return reporting requirement" to use the guided RSU (PSU) interview when reporting the sale except in two instances:

1. The compensation associated with vesting wasn't included in your W-2 (extremely unlikely)
2. You have absolutely no clue as to the basis to use for the sale (and you should know that)

So use the regular "stock sale" interview and enter the 1099-B as it reads, and then correct the basis using the mechanism provided by TurboTax.

PSUs are simply RSUs with a slightly different vesting trigger.  Instead of the simple passage of time associated with RSUs, PSUs depend on staying with the company until some goal or event is achieved.

Click here for "How to enter RSU's on TurboTax Online?"

Click here for additional information on reporting RSU's.
 

Click here for additional information on reporting RSU's on your tax return.
 

[alek]

Hello,

I understand how the vesting process of RSUs and PSUs works.

My W2 has two separate amounts listed one for the RSUs and  PSUs.

If I enter the PSU transaction as a RSU sale then the amount will not match up with what is on the W-2 for the RSU amount.

This is why I am asking the question of how should I enter the PSU transaction. From what I am understanding is it should be entered as a regular stock transaction, is that accurate?

[TaxBizLady]

PSUs or performance shares are given to employees based on how well a company performs over a certain period, usually three years. The number of shares awarded depends on the success in key metrics for the business. If the overall performance exceeds expectations, more shares are given to the participants.

Taxing PSUs is similar to RSUs. Initially, there is no tax liability (taxes due). Income tax is triggered when the shares vest and are given to individuals. If the eventual sale price surpasses the shares' fair market value (FMV) at vesting, capital gains tax applies. It is also possible to delay the tax by placing PSUs into the company's NQDC plan.

Vesting is a retention tool that gives ownership or entitlement over time. The vesting schedule is predetermined and outlined in the company's stock plan. Once fully vested the employee has complete ownership of shares, and can sell or transfer stock. That is why most states do not have a tax liability upon purchase but at sale. So, for tax purposes, treat PSUs the same as RSUs to calculate any taxable capital gain at sale.