Tax Center: Restricted Stock Withholding

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Restricted Stock Taxation: What You Need To Know (Part 2)

Bruce Brumberg and Kate Victory
Along with stock options, your company has awarded you restricted stock. Restricted stock grants carry their own requirements and tax rules, which can significantly differ from those of stock options.

IRS Guide To Auditing Techniques For Stock-Based Compensation

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The IRS tips its hand on what its agents look for in audits related to all types of stock pay to ensure compliance, whether by corporations or executives.

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UPDATED! How and when are taxes withheld from my restricted stock?

Restricted stock withholding is similar to withholding for most other forms of supplemental compensation. You can have different choices for paying taxes, or your company may automatically...

How does my employer determine the amount of withholding due at the vesting of my restricted stock grant?

Federal income tax is imposed on the value of the shares at vesting (or at grant if you made a Section 83(b) election, which is unavailable for RSUs). Tax is generally withheld at the flat rate of...

NEW! What is backup withholding? How do I prevent it or recover it?

Backup withholding is a form of tax withholding on income from stock sales, along with interest income, dividends, or other types of payments that are reported on Form 1099. Your brokerage firm is required to make backup withholding if you are...

Will the amount of tax withheld at my restricted stock vesting cover the amount of tax that I am required to pay when I file my return?

Employers usually withhold federal income taxes at...

When my restricted stock vests, will I need to make estimated tax payments?

At a minimum, when the restricted stock vests your company will withhold taxes at the required federal withholding rate for...

What is a lapse election, and why do I need to make it before the restricted stock or restricted stock units vest?

The "lapse" is the end of the restriction that prevented the shares from vesting and being transferred to you. The lapse election is the method by which you choose withholding methods and what will be done with the...

When my restricted stock vests, how does my company choose the stock price for calculating my W-2 reporting and my share withholding?

This depends on how your stock plan defines fair market value (FMV). Some companies may use the closing price on the vesting day, which...

Form 8949 and Sch. D diagrams! Do I need to report on my tax return the restricted stock I sold or surrendered to my company for the tax withholding?

You should definitely report a sale for taxes at vesting if you received a 1099-B that shows the proceeds. The IRS will...

Does the tax-withholding rate for supplemental income differ for amounts less than $1 million and for amounts over $1 million?

Depending on the aggregate amount of supplemental income for the year, a two-tier rate applies. The withholding rate for supplemental wages that exceed $1 million in a calendar year is...

May I have my employer withhold more taxes upon the vesting of my restricted stock than the minimum required amount?

This can depend on different factors. Whether you can withhold more or not, the mandatory federal withholding rate is...

UPDATED! How soon after my restricted stock vests must the IRS receive my withholding taxes?

Companies are still uncertain about the exact timing. With NQSOs, the clock doesn't start ticking until you take action to exercise. However, with restricted stock and RSUs...

UPDATED! My new company withheld Social Security tax from my wages even though I "maxed out" on these taxes this year from my stock option exercise and restricted stock vesting at my prior employer. Can I get a refund or a credit on my tax return?

When you have more than one job in a year, each company must withhold Social Security tax without considering what the other company withholds. The result could be...

How do I report the income that results from the vesting of my restricted stock on my federal income-tax return?

For each part of the grant that vests in a tax year, the full value...

I'm no longer an employee, so why is there withholding on my restricted stock vesting?

Former employees' transactions, regardless of the reason for termination, follow the same withholding and reporting requirements that apply to...

At death, do tax withholding and reporting apply to restricted stock if the vesting is accelerated or allowed to continue?

The acceleration and vesting trigger ordinary income. Whether this is W-2 income and taxes are withheld, or whether it is 1099 income, depends on...

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