Restricted Stock: Restricted Stock Units
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Matt Simon
Restricted stock units (RSUs) have become the most popular alternative to stock options. While RSUs share many of the same issues as restricted stock, there are differences, and it is important to understand the basics of RSUs in their own right.
Matt Simon
The taxation of RSUs generally resembles that of restricted stock but carries some important differences.
Matt Simon
NEW! While restricted stock and RSUs are relatively straightforward, they have technical aspects you must understand to make the most of them. Learn the essential facts of restricted stock and RSUs, including basic concepts, vesting schedules, and tax treatment.
W.E.B. Bantling
Many companies have turned away from stock options and begun to make outright stock grants that must vest before the shares can be issued. For employees, these grants have added a new layer of complexity to their equity compensation. This article presents six questions I get all the time from clients who have received restricted stock, restricted stock units, or performance shares.
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While they are siblings, they have important differences, as explained below and as shown by the chart. The traits of restricted stock units include the following...
Generally, yes, with two exceptions. First, with RSUs you cannot...
Restricted stock shares are issued up front at grant, but you do not own them outright and cannot sell or transfer the shares until the time-based restrictions lapse. With standard restricted stock units the situation is basically similar, while with performance shares your company sets goals that must be met, such as...
The timing of taxation is different than that of stock options. You pay tax at the time the restrictions on the stock lapse. This occurs when...
The compensation philosophies of companies are continually changing under the influence of many factors, from accounting rules to...
Starting with the broad grants of RSUs at Microsoft and Amazon, recent corporate practices and survey data suggest it is more likely that your company will grant you...
Each type of grant has its supporters and its own benefits. By using RSUs, the company accomplishes the following...
Delaying the delivery of RSU shares (and thus ordinary income taxes) at vesting depends on whether your company has a provision for this in its stock plan. The deferral needs to be structured correctly, as otherwise it can lead to tax penalties. Deferral is not...
"Releasing" restricted stock is the process by which your company transfers or "frees" shares to you when...
Restricted stock units result in ordinary income to you. This occurs when...
You should definitely report a sale for taxes at vesting if you received a 1099-B that shows the proceeds. The IRS will...
You need to complete Form 8949 and Schedule D for the year of the sale of your stock and file it with your Form 1040 federal income-tax return. You do this even if...
Technically, different tax code sections apply, though under most grants the tax results are similar. With restricted stock you are taxed at vesting or earlier at grant if you make a timely Section 83(b) election. Most experts believe that with RSUs you cannot make...
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...
These provisions raise tax complications for both restricted stock and RSU grants, though the issues vary. For tax purposes it does not matter that you must actually retire to vest the shares. With restricted stock, taxation is triggered when the grant is...
A delay in RSU payout can occur. This depends on the reason for the acceleration, whether you are ending your employment with the company, and your position in the company...
When a company pays dividends on outstanding shares of stock, it can choose...
For restricted stock, it begins on the day after vesting, unless...
Restricted stock and RSUs are governed by separate sections of the US tax code. Most experts say that you...
Section 409A on nonqualified deferred compensation, introduced by the American Jobs Creation Act (AJCA), has created uncertainty...
Receiving deferred stock units, or RSUs that let you delay the delivery of shares (and thus taxes) at vesting, depends on...
Within two business days of any grant, you file Form 4 electronically under the SEC's Section 16 rules. However, while the filing rules for these grants are similar, there are some important differences that depend on the performance goals used...
This depends on what triggers vesting. Section 162(m) of the tax code limits your company's deduction to $1 million unless a senior officer's compensation over this amount meets the performance-based exception. Stock grants are structured to meet this by...
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Restricted Stock Units Made Simple (Part 1): Understanding The Core Concepts 
