Question on RSU and W2

[nizami22247]

Hello, all. 

I have a question. I see my Gross Pay has RSU included, but i don't see any box that tells about it (box 14). 
Just wondering whether this is correct or what should i do ? 

[DawnC]

When you receive an RSU, you don't have any immediate tax liability. You only have to pay taxes when your RSU vests and you receive an actual payout of stock shares. At that point, you have to report income based on the fair market value of the stock.   If none of the stock was sold, you don't have to do anything.   But when you do sell the stock, the additional compensation that is included on your W-2 will be factored into the gain or loss that is reported then.  

After your stock vests, gains or losses from future sales will be reported on Form 1099-B, like any other stock sale.   The amount of compensation added to your W-2 will be part of your cost basis when the stock is sold.    

Please see Paying Your Taxes at the bottom of How to Report RSUs or Stock Grants on Your Tax Return.  

[nizami22247]

Thanks for the reply. I get that. I was more wondering if i see RSU being added to the total amount of Gross Income, but i don't see it anywhere on W2 boxes, is that alright?  Shouldn't that be usually reported on box 14 ? 

[nizami22247]

Also to add into this question. When RSUs got vested portion of stocks were withheld to pay taxes (Federal/SS/Medicare/State/VDI). Shouldn't that paid taxes be counted towards total taxes paid for the year? 

[DawnC · Accepted solution]

Yes, if stocks were sold to pay taxes, you should have a 1099-B that reports the sale.   The vesting generates taxable compensation.   It is usually reported in Box 14 (with a code U or sometimes just RSU), but it doesn't have to be.   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.  Or if you had shares sold to cover the taxes.  When you enter the 1099-B using the TurboTax Employer Stock sale interview, TurboTax will make sure that the compensation portion is reflected in the cost basis of the sale.   If the shares were sold the same day, you may have a small loss reported from the 1099-B, but the taxes are included on your W-2.   

What are restricted stock units (RSUs) and how do I report them?n TurboTax?

[brindusa67]

I understand that the taxes should be included in the W2 when the vested RSU's are reported in Box 14. However, the taxes reported on the W2 do not seem to reflect the RSU's sold at vesting to cover the taxes. How do I correct that in the TurboTax for 2020? I do have the 1099-B from Etrade. However, the cost basis is "0" and I assume that is not correct. Do I enter this 1099-B in Turbo Tax?

[AmyC]

The 1099-B must be entered. The 1099-B is entering the cost basis that they know, not reality. You don't enter 0, you enter that actual cost basis.

When the RSU is vested or when sold. This is either one but not both. You made the option with your employer for how to report your RSU.

If the W2 showed the RSU when vested, you paid the tax then. Locate the portion that matches up with the shares you sold and enter that basis.

I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s. This will protect you down the road as proof of your basis in your various investments. As you go through life, rollovers, RSU sales, and more will be captured for you.

@brindusa67