Q1: How is RSU amount calculated on W-2. Is it based on closing price? Q2: In TT, for RSU sales, what is "market price on vesting date": sell price or closing price?

[jr20101]

Example: 500 shares vested on a given day. Same day, one sells 100 RSU shares at $10 during market hours. The stock eventually closes at $11. What amount should appear on W-2 as RSU income.  In TurboTax, what number one should put to answer the question: "market price on vesting date". $10 or  $11. Thanks in advance.

[TomYoung · Accepted solution]

"Q1: How is RSU amount calculated on W-2"

        Compensation = (GROSS # of shares that vested) x (per share "fair market value" used by you employer)

"Q2: In TT, for RSU sales, what is "market price on vesting date": sell price or closing price"

There's no hard and fast rule here as to what, exactly, is a stock's fair market value.

You should understand that there's no absolute "income tax reporting" need to use the RSU step by step interview if you know your per share basis, (clearly that's the same per share "fair market value" used by the employer), and the compensation has been reported on your W-2.

So if you don't know your basis in the stock, e.g., you never understood how basis was calculated for RSU stock, you lost all your documents if a fire, and the company has gone out of business, then you can use the RSU step by step interview and it asks the magic question of "what was the fair market value at vesting date?"  People use various ways to come up with that number, like using the average of the high and low for the day, using the average of the opening and closing price, using the opening price, using the closing price, using the weighted average for every trade in the day, etc., etc., etc.  The logic behind asking that question is that most of the time most stocks don't fluctuate in a given day by more than a couple of percent so any reasonable estimate you can come up with - average of high and low price, opening price, closing price, average of open and closing, etc., etc. is "close enough."

Or if for whatever reason your employer didn't report the compensation income associated with the vesting and you want to do the right thing and report it, then you can use the RSU step by step interview to do that, too.  TurboTax whatever per share fair market value you enter, multiplies that by the gross number of shares that vested, and makes the calculation.  At the very end of the "Stocks, Mutual Funds, Bonds, Other" interview it tells you the amount it has calculated and asks if that's the amount on your W-2.  If you answer "No" to that question TurboTax add the compensation it has calculated to line 7 of Form 1040.

So if you know your per share basis and the compensation has been reported on the W-2 it's a lot easier to just enter the information off the broker's 1099-B exactly as it reads, bad basis and all, and then correct the amount by clicking the blue "I'll enter additional info..." button and entering the correct basis on the page that comes up.

Tom Young

[jr20101]

Thanks Tom for the explanation.

[TomD8]

@TomYoung - Can you assist?

[TomYoung]

Assist with what?  I'm not seeing anything here to respond to.

[TomD8]

@TomYoung - Sorry, I attached this to the wrong question.  I've since attached the request to the correct question.  Thank you.