What taxes do I owe after selling RSUs?

[kateb]

I have sold RSUs over the course of the past year however I have only actually received ~half of those RSUs as my employer sold a fair share as a sell-to-cover sale and I never actually received that money. Do I have to pay taxes on these sold stocks? For the remaining stocks I sold and received money for (short-term), do I pay full income tax on those? 

[Critter · Accepted solution]

Yes you pay taxes on ALL the stock sold no matter what the proceeds were used for... in your situation you sold some stock to pay for the taxes on all of the stock purchased/received.  This sets the cost basis of the stock you kept ... so now you will only pay taxes on the profit of the stock kept to sell later.  

For instance you got 100 shares of stock worth $10/share ... you had to pay the tax on the RSU  100 x $10 = $1000 basis and the tax owed  was say $200 so you sold off 20 shares @ $10 share to pay the tax bill... this is reported on both the W-2 and the 1099-B.   This leaves you with 80 shares with a cost basis of $800.  When you sell those 80 shares say for $900 later you will only pay tax on the profit of $100.   

[Anonymous]

"For the remaining stocks I sold and received money for (short-term), do I pay full income tax on those?"

yes you will pay the ordinary income rate on all NET short term gains  provided they are not offset by NET long term losses.   

[kateb]

Thank you and @Critter !! I think I follow but wanted to ask for additional guidance using another example:
1. 46 of my RSUs vested in March, my company sold 20 of them as sell-to-cover and I sold 26 (short-term gain). 
2. The 26 I sold had an adjusted cost basis of $2098, total proceeds $2068, gain/loss $2068, adjusted gain/loss of $30. 

Do I owe taxes on the $2068 or on the $30? And what happens to the money from the 20 sold as sell-to-cover? Thanks, again!!

[Critter]

1. 46 of my RSUs vested in March, my company sold 20 of them as sell-to-cover and I sold 26 (short-term gain). 

The sale of the 20 to cover costs will be reported on the W-2  AND  the 1099-B from the broker ... taxes were already taken care of thru payroll so you will show a loss on the Sch D of the broker's fee. 

2. The 26 I sold had an adjusted cost basis of $2098, total proceeds $2068, gain/loss $2068, adjusted gain/loss of $30.  Now since you sold the 26 with a  cost basis of 2098 and sold it for 2068 so you have a $30 loss to report on the Sch D.   Stop making this harder than it is ... and when you get the tax reporting forms in Jan it may make more sense. 

[TomYoung]

Here's another wrinkle.

Brokers are not required to create 1099-Bs for "same day" sales so you may or may not get a 1099-B for the stock sold "for taxes."  If you don't get a 1099-B you don't have to report the sale, but you might want to anyway as the typical same day sale creates a small loss due to selling commissions and fees.

It's important to understand that same day sales - either yours or the stock sold for taxes - generally create a small loss.  That's because the vesting of the RSU creates compensation (GROSS number of shares vesting x per share "fair market value" at the vesting date) and that compensation becomes your basis for the GROSS number of shares.  So if you sell those shares on the same day the shares vest the selling price is usually pretty close to that "fair market value" used by your employer so you'd expect a loss because of the cost of selling.

[kateb]

Roger that. Thank you both! @Critter @TomYoung