I Paid Taxed on My Vested Rsu Shares. Do I Have to Pay Again at Tax Filing?
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How to Report RSUs or Stock Grants on Your Revenue enhancement Return
Updated for Tax Year 2022 • January 21, 2022 05:03 PM
OVERVIEW
Restricted stock units (RSUs) and stock grants are frequently used by companies to advantage their employees with an investment in the company rather than with cash. Equally the name implies, RSUs have rules as to when they can be sold. Stock grants oft acquit restrictions every bit well. How your stock grant is delivered to you, and whether or non it is vested, are the primal factors when determining tax handling.
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Restricted stock units
A restricted stock unit is a substitute for an actual stock grant. If your company gives y'all an RSU, you don't actually receive company stock. Rather, you lot receive units that will be exchanged for actual stock at some futurity date. Typically, the appointment you take ownership of the bodily shares, known equally the vesting engagement, is based on either time or performance.
When yous receive an RSU, you don't have any immediate revenue enhancement liability. You only have to pay taxes when your RSU vests and you receive an actual payout of stock shares. At that bespeak, you take to report income based on the fair market value of the stock.
Stock grants
With a stock grant, a company provides you with stock shares rather than a unit of measurement that gives you a future right. Nonetheless, this doesn't ever mean you lot're immediately free to sell the shares. Many stock grants accept a vesting period, during which you may all the same lose the rights to the stock.
Just when you are fully vested in the stock do you take 100% buying rights to do with the stock equally you lot please. As with RSUs, stock grants typically vest afterwards a period of time, or after sure performance measures are met. You're not liable for income revenue enhancement until your stock grant vests, at which bespeak you must written report income equal to the value of the stock.
Selling your stock
You'll likely have to pay taxes again if you lot sell stock y'all received through an RSU or a stock grant. After y'all pay the income revenue enhancement on the off-white value of your stock, the IRS taxes y'all the aforementioned equally if you bought the stock on the open market. Here are the different ways yous tin can exist taxed:
- If you sell the stock at a higher price than its fair value at the time of vesting, y'all'll have a upper-case letter gain
- If yous hold the stock for less than one twelvemonth, your gain volition exist short term, and you'll owe ordinary income tax on it
- If you concord the stock for one yr or more, your gain volition be long term, meaning you'll pay tax at the more than favorable capital gains rate
Paying your taxes
Since stock you receive through stock grants and RSUs is substantially compensation, you'll normally come across it reported automatically on your Due west-2. Typically, taxes are withheld to go confronting what you might owe when you do your taxes. As with all withholding, the taxes your employer deducts from your paycheck may not be enough to cover the total amount of tax you owe when yous file your return.
If your employer doesn't withhold tax on your stock grant or RSU, you may be responsible for paying estimated taxes. With estimated taxes, you'll have to send payments to the IRS about every quarter, typically on Apr xv, June 15, September 15 and Jan 15 of the following year. The payments are estimates of what y'all'll owe in total when you prepare your tax returns for that twelvemonth.
For example, if yous get a huge stock grant in Feb, you'll be expected to pay estimated taxes for that grant on April xv, if there is no employer withholding. Even so, if your next stock grant isn't until December, you might not need to ship estimated payments in June or September.
If you don't want cash withheld from your paycheck, you lot may be able to pay the tax by having your employer take it out of the shares. For example, if y'all demand 10% tax withheld and receive 100 shares of stock, your employer may exist able to liquidate ten shares and give y'all a internet grant of 90 shares.
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Source: https://turbotax.intuit.com/tax-tips/investments-and-taxes/how-to-report-rsus-or-stock-grants-on-your-tax-return/L55yZieu0
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