Tax withheld from RSU sell to cover are not included in my W2

[vt117]

Is it possible that my W2 incorrectly is omitting my RSU sell to cover proceeds? Using round numbers for my situation:

• I received 100 shares RSU, 40 were sold to cover taxes at vest date
• I sold 50 shares at a later date, leaving me with 10 shares held
• W2 income box 1 includes income from all 100 shares vesting at FMV on vest date, as expected
• 1099B shows two transactions: 40 shares sold to cover, 50 shares elected sale (basis is not reported, but I know to correct this from statements)
• W2 income box 2 does not include proceeds from 40 shares sold. It only shows my paycheck withholding amount

In this case it seems to me that I am being taxed for the 40 shares sold to cover RSU grant since it appears on my income, but am not being credited for the proceeds from that sale to actually pay for the RSU grant. Is this correct?

I have tried using the step-by-step guide in TurboTax 1099B section to try two different ways of reporting this:

1. combining all 100 shares into a single item, stating 50 sold, 40 withheld for taxes
2. following 1099B and listing two items: 40 shares sold with 40 withheld for taxes, and then 50 shares sold and 0 shares withheld for taxes

It seems like both methods have same end result, I'm assuming this is fine either way, but am I reporting this correctly, or is my W2 incorrectly filed? By proceeding this way, is Turbotax correctly adjusting my withheld amount on top of what is reported in my W2 box 2 (which is just payroll withholding)?

Thanks in advance!

[TomYoung]

"W2 income box 2 does not include proceeds from 40 shares sold. It only shows my paycheck withholding amount"

At a guess, the taxes withheld ARE included in the various "taxes" boxes of your W-2 as that's the proper reporting.  Cash raised from the sale of stock "for taxes" is passed back to the employer, who pays the government(s), and scatters the amounts around your W-2 as appropriate.  Typically this is not disclosed to you on your W-2, unlike the income created by the vesting.

The place to put this to bed conclusively is to call the payroll department and ask IF THE TAXES ARE INCLUDED on the W-2.

Usually people raise this issue when they sell the stock and see the "Refund-O-Meter" at the top of the screen change dramatically for the worse, and that's a sure tip-off that they've used the wrong basis for the stock, but you say that you know the correct basis so that's not the issue here.  So I'm going to bet, and give you odds, that the taxes ARE included on your W-2.

Absolutely NOTHING you do using the RSU step by step process will give you "credit" for taxes withheld.  All that happens when you enter shares in the "shares withheld for taxes" box is that those shares get subtracted from the "shares vested" to come up with a "shares available for sale" number.  There's no "dollar" effect going on.

Tom Young

[vt117]

Thanks Tom. I think I'm convinced there is a mistake in my W-2 since no number or combination of numbers on my W-2 come even close to matching the amount of tax withheld that I see from my YTD summary (and from tallying up my sell to cover proceedson my brokerage).

I did reach out to payroll and am waiting to hear back. Will update here if there is any new insight that may be helpful to others.

[gkishoreji]

Facing the same issue. Did you  get a resolution?

[TomYoung]

I expect the silence from the OP speaks volumes.  I've probably answered questions along this line maybe a hundred times and told the poster to check with their payroll department.  I've never heard back from any of them saying "the payroll department confessed that they screwed up."

Check with your payroll department.  Omitting withheld taxes paid on a W-2 is a very serious mistake.  I wouldn't be surprised if it DOES happen from time to time, but I'd bet money and give odds that it's fairly rare.

[vt117]

Sorry, I had forgotten about this posting since payroll at my company actually never got back to me, and I actually ended up figuring out regardless.

Tom had it right on his first assumption and my W-2 was actually correct. My confusion arose from comparing my total proceeds from sales to cover reported in my brokerage/1099B and what was reported in box 2 of my W-2, which is ONLY federal tax withholding. I was hung up on why my total proceeds were barely more than my federal withholding in box2, and the difference did not equal my paycheck withholding total. I realized after digging through more statements that the proceeds were actually correctly distributed across all taxes (state, SSI, etc.), so the total amount was accounted for.

[gkishoreji]

Thanks OP and Tom. I also dig deeper into my payslips. Did notice some withholding reported in taxes. But not enough (not sure why,). So I had to end up paying taxes when filing my returns.

[Tjriesgo]

Tom, I'm not sure you are understanding as I am in the same position and can tell you now the taxes are not spread out over the W2. Example I had 19 shares vest 6 were sold to cover taxes at $1750 a share. $10500 is not spread out anywhere on my W2, I have my standard income tax reported and nothing more. But this $10500 is reported as a sale on my 1099-B. I have these sales twice a year for the last 3 years. 

[TomYoung]

"Tom, I'm not sure you are understanding..."

You're not sure I'm understanding what? 

My consistent answer in this thread was that while I'm sure once in a while mistakes get made, the Standard Operating Procedure for a vesting of RSUs is that shares are either withheld or sold "for taxes."  If shares are sold then the cash goes back to the employer and that's what funds the taxes.  And, more or less, the OP and another add-on poster both found out that was the case for them.

Now, maybe you're in the "mistakes get made" camp but there's not a single thing I can do about it.  If this has been going on twice a year for the past three years there's a hell of a lot of money missing.  If you didn't get the $10,500 then who did?  Call up the broker and ask.  If the broker somehow withheld taxes, (fairly rare), those taxes would be included in the "taxes" boxes of the 1099-B.  Are there? 

As "Deep Throat" supposedly said to Bernstein and Woodward, "follow the money."

[jennalit]

This seems to be a screw up then, i have as similar question; and payroll is ghosting me.  I'm so confused.  I have one paycheck stub when all my RSUs vest, and it shows a breakdown of taxes paid, but there's 10K shortfall. Would these monies be captured elsewhere? IDK!

 Important, to differentiate two types of taxable events

1) Vestiture

2) Sale (capital gains, ect.) - where you need cost basis already taxed at 1) Vestiture