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Restricted stock units (RSUs) are a form of compensation generally taxed at the time of vesting. They differ from employee stock options, which are usually taxed at the time of option exercise.

Your employer is required to withhold taxes as soon as the RSUs become vested.

If you made an IRC section 83(b) election, you will be taxed and have withholding at the time the stock is transferred to you.

There are three options once the stock vests:

  1. A same-day sale of all the stock. You receive the cash left over after subtracting withholdings.
  2. Sell to cover. The employer sells just enough shares to cover the tax withholding and you keep the remaining shares and can sell them whenever you want. (Often an employer automatically uses this option.)
  3. Cash transfer. The employee covers the required tax withholding amount with cash. If you pay over the amount of cash to cover withholding, then all of the shares belong to you and they can be sold whenever you want.

In all three options, the employer will include the total value of the vested RSU shares in Box 1 of your W-2, along with the amount of your normal wages.

Your basis in all vested shares you receive is the amount included on your W-2 as income plus any amount you had to pay for the shares.

Withholding federal and state taxes

The employer is required to withhold both federal and state taxes. This withholding will be reflected on your W-2 along with your normal withholding. Do not enter any withholding on Form 1099-B in TaxAct®, since it is already reflected on your W-2.

Your basis in all vested shares you receive is the amount included on your W-2 as income plus any amount you had to pay for the shares.

Receiving Form 1099-B for options 1 and 2

If the RSUs fall into the first or second option, you’ll receive a Form 1099-B reporting the total sales proceeds for the number of shares sold. (You may receive a 1099-B for option 3 if you sold any of the shares during the current tax year.)

Enter the date sold and total sales proceeds from the 1099-B you received into your TaxAct return (see Entering in Program – Form 1099-B).

For the date acquired, enter the date the shares vested (or enter "various" if you sold shares that vested at different times). However, if you made an election under IRC section 83(b) to include the value of the stock in your income in the year it was transferred to you rather than the year it will be substantially vested, the holding period would start on the date you received the stock.

What to enter for cost or other basis

This is the amount included in income for the number of shares sold, as well as any amount per share you had to pay. For options 1 and 2 above, your entry for cost will generally be the same as the amount reported as sales proceeds. Since the stock is sold on the same day it vested, all income is reported on your W-2, so no income (gain/loss) should be reported when entering the 1099-B information. Other 1099-B information must still be reported in TaxAct and is transmitted to the IRS with your return.

Determining how your stock was transferred: You may need to talk with your employer or plan administrator to determine how your stock was transferred and what amounts are reported on your W-2.


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