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

Internal Revenue Service
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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FAQs (Jump to articles)

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...

Schedule D diagram! Do I need to report on my Schedule D the restricted stock I sold or surrendered to my company for the tax withholding?

The reporting for the income at vesting and at the later sale of the remaining shares can cause confusion. You should definitely report a sale for taxes if you received a...

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...

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...

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...

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...

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 supplemental income (assuming you didn't make a 83(b) election to pay the taxes at grant instead). However, depending on your income, this minimum withholding may not be enough. If so, you will need to...

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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