RSU stocks vested but not sold but taxed by employer

[vitan_6]

I received 10K worth stocks from my employer which got vested in 2020. Employer already took out 3K amount to cover the taxes but reported 10K in Box 14 of my W2. Because of this my taxable income has increased, will I have to pay tax again on the 10K ? Anyway to avoid it ?

I have not sold any of these 10K worth stocks, so the brokerage has not reported anything on 1099-B.

[yschwarz]

Your employer has to report the 10K as an income. Taxes are paid, so if RSU at day of sale be same of day of vesting, you will not need to pay anything (As your employer already paid for it) However if there is a difference in stock price at day of sale you are liable to pay tax on the gain you made, only to the portion you sold.

No way to avoid paying this tax (If you now one let me know :)) The other issue that is a side effect is that the RSU raise your initial W2 income and you may pay more taxes because you are now on higher tax bracket.

[vitan_6]

Thanks for the reply! It makes sense that it increases the taxable income, however I am trying to understand how turbotax knows that my employer has already deducted the tax (22% for example) from my RSU vested stock amount ?

Without that information, turbotax or any other tax service would calculate the whole tax again, correct ?

I am trying to avoid that 22% tax again. Any place where I can enter in turbox tax that the employer has already taken out 22% ? Thanks in advance !

[yschwarz]

Turbotax calculate the tax based on the cost bases you entered (If you didn't, you should)

This is the stock price at date of vested x stock count you sold at 2020. You pay the tax on the difference between cost bases and sale price

[vitan_6]

But I did not receive the 1099-B from Brokerage because I did not make any sale. So, I am not sure how to report it.

[yschwarz]

If you didn't sell any of it, the tax was already paid by your employer and is reflected on your W2

Your employer sell some of the stocks to cover for the tax and pay the IRS, so you will not need to

[vitan_6]

How do I know that they have included it in the W2 ? In the W2 issued to me, they have shown the taxes  withheld on my overall wages and those taxes are not equivalent to the tax bracket, so I am due some amount to IRS and thereby my concern that they probably have not reported those taxes on W2.

[DawnC]

You need to contact your employer and/or broker and get the 1099-B.   If your employer sold 3K of the stock to cover the taxes, there is a 1099-B out there for that transaction.  When you enter that 1099-B, TurboTax will calculate the gain or loss.   If the shares were sold on the same day, there will be next to no gain or small loss due to transaction fees.  

When you indicate that the 1099-B is employee stock, the program will have you confirm that the income was reported in Box 1 of your W-2.   The taxes are included in your withholding, but you are paying regular income tax on the income.   However, when you sell the stock, the amount added to your W-2 becomes the basis which will reduce the gains on future sales.   

How to Report RSUs or Stock Grants on Your Tax Return

Your employer is not required to withhold Social Security (FICA) taxes when you exercise the option to purchase the stock. Also, your employer is not required to withhold income tax when you dispose of the stock. But you still owe some income tax on any gain resulting from the sale of the stock.

You only have to report it if you sold stock that was purchased through an ESPP (Employee Stock Purchase Plan).  In that case, the sale will be reported on Form 1099-B, which you should receive from your brokerage around tax time (early February is typical).   Simply enter your 1099-B to report the sale on your tax return.    If you merely purchased (but didn't sell) ESPP shares, there's nothing to report.   However the stock that was sold to cover the taxes is a reported sales transaction.   

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

Employee Stock Purchase Plans

[rupesh151]

Hi,

I/4th of my RSUs vested in 2020. My company sold few shares to cover for taxes. However, they sold it at 22% federal rate and I fall in 35% tax bracket. How can I add the remainder to my tax filing?

[ThomasM125]

The income associated with the vesting of the shares should be reported on your W-2 form and as such it will be added to your other income on your tax return. Any tax due will be included with the tax due on your individual tax return.