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Restricted Stock

Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.


Articles

Restricted Stock & RSUs: 10 Mistakes To Avoid On Your Tax Return This is premium content

UPDATES! This article explains common errors to avoid when your tax return involves restricted stock/RSUs and offers related helpful tips.

Living And Working In Multiple States: Challenges For Mobile Employees In The USA This is premium content

Podcast included! Moving between US states, whether to relocate permanently, travel for business, or retire, can involve tax complications for people who have stock compensation. This article presents the tax issues that you may encounter when you leave your home office and cross a state line.

Restricted Stock: Tax, Financial, Estate, And Retirement Planning (Part 2) This is premium content

Podcast included! Careful planning can help you maximize the value of restricted stock and RSUs by preparing you for decisions you must make. Part 2 covers complex issues in financial, estate, and retirement planning.
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UPDATES! American Taxpayer Relief Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies This is premium content

Podcast included! The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you must consider in deciding when to exercise stock options, when to sell company shares, and how to plan around income from restricted stock/RSU vesting. Although tax reform is on the horizon, these tax laws will remain in place until new laws are adopted.

UPDATES! Tax Planning For Options, Restricted Stock, And ESPPs Since The 2013 Tax-Law Changes: High-Income Taxpayers Impacted Most (Part 1) This is premium content

Notable shifts in tax rates occurred in 2013 for people with high incomes. Part 1 surveys these important tax changes and considers their impact on planning. Unless or until tax reforms become effective, the rates and income thresholds covered in this article still apply.

Decisions At Grant With Restricted Stock (Part 3): Analyze Your Alternatives This is premium content

Now that you understand the risks of choosing to be taxed at grant with a Section 83(b) election, should you do it? Part 3 takes you through the analysis.

How Tax Rate Changes Impact Your Stock Grant Strategies (Part 2): Restricted Stock This is premium content

With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy for equity compensation and company stock holdings to determine whether action is required. Part 2 looks at restricted stock and restricted stock units.

Form 8949 and Sch. D diagrams! How To Report Sales Of Company Stock On Your Tax Return

If you sold in 2016 any shares that you acquired from equity compensation or an ESPP, you will need to report the sale on the federal tax return that you file in 2017. Learn here what you must know to avoid expensive mistakes and unwanted IRS attention. Our annotated diagrams of Form 8949 and Schedule D can help you make sense of the reporting rules.

VIDEO! Tax-Return Forms And Reporting Rules For Stock Sales

Learn how to prevent costly tax return mistakes with this animated presentation on IRS Form 1099-B, IRS Form 8949, and Schedule D.

Avoid Overpaying Tax On Stock Sales: Understand Forms 1099-B And 8949 For Tax-Return Reporting This is premium content

UPDATES! The stock-sale information provided by brokers on IRS Form 1099-B has changed. Cost-basis reporting, both for your broker on Form 1099-B and for you on your tax return, is now more complex, confusing, and vulnerable to errors. This article explains the crucial facts you must know to avoid overpaying tax or attracting unwanted IRS attention.

VIDEO! Tax-Return Reporting Of Company Stock Sales: How To Avoid Overpaying Taxes

Learn the rules for reporting stock sales on your tax return, along with costly errors to avoid if the shares you sold came from stock options, restricted stock/RSUs, stock appreciation rights, or an employee stock purchase plan. Among other issues, you must understand your "cost basis" to avoid overpaying your taxes. Running time: 8:05.

Year-End Strategies For Restricted Stock, RSUs, And Performance Shares: Seven Ideas To Consider This is premium content

As part of your year-end and year-beginning tax planning, don't forget to review your holdings in restricted stock, restricted stock units (RSUs), and performance shares. This article presents strategies that many experts suggest.

Stockbrokers' Secrets: Year-End Planning For NQSOs, Restricted Stock, And RSUs This is premium content

Learn about year-end ideas that apply to NQSOs and restricted stock/RSUs, and consider the impact of recent tax-rate changes.

FAQs

What are the biggest mistakes with restricted stock or RSUs that I can make on my tax return, and how can I avoid them? This is premium content

It is all too easy to make costly tax-return errors that attract unwanted IRS attention. Learn how to prevent mistakes...

When my restricted stock or RSUs vest, will I need to make estimated tax payments? This is premium content

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

Are there any strategies for paying estimated taxes on income from stock options and restricted stock? This is premium content

Estimated-tax periods end on the last days of March, May, August, and December, with payments due by the 15th (or the next business day) of the following month. If you are paying estimated taxes, one strategy is that just after the start of an estimated-tax period you can...
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How will my broker know which shares to sell? Should I identify them in some way? This is premium content

If you have more than one batch of company stock, you are responsible for providing your broker with enough information to identify which shares to sell. If you do not specify...

What are some major issues to be aware of when reporting stock sales on my tax return? Why have these issues arisen?

Major changes have occurred in the tax reporting for stock sales during the past few years, making accurate tax-return reporting more complex and difficult...

In the cost basis I use to report sales of company stock on my tax return, what part comprises the W-2 income from stock compensation or an ESPP? This is premium content

When your W-2 income is added to the price you paid for the stock, this is your cost basis on your tax return. The table below presents the compensation portion of your tax basis for all types of stock grants and ESPPs...

My company is now granting restricted stock, and the current share price is much lower than I think it will be in a few years. Any tax-planning ideas? This is premium content

For restricted stock, you can make what the tax code calls a Section 83(b) election to be taxed immediately at grant instead of later at vesting, when your stock price, and thus your tax rate, may be much higher. However, before you make your decision, realize that...

How have IRS Form 1099-B and cost-basis reporting changed for sales of stock acquired from my stock options, restricted stock, or ESPP? What do I need to do differently because of the changes?

If you sold shares during the calendar year, your brokerage firm will issue IRS Form 1099-B by mid-February of the following year. This is an important document that you must have to complete your tax return for the year of sale...

What if the wrong cost basis is reported on my 1099-B? How do I report the right cost basis on Form 8949 of my tax return? This is premium content

From our interpretation of the forms and their instructions, myStockOptions.com recommends the following reporting steps to avoid overpaying taxes...

Form 8949 and Sch. D diagrams How do I report a sale of restricted stock on my federal income-tax return? This is premium content

You need to complete Form 8949 and Schedule D for the year when you sold your stock and file them with your Form 1040 federal income-tax return. You do this even if...

Form 8949 and Sch. D diagrams In the tax-return reporting for restricted stock, do I need to report shares that I sold for taxes or that my company used for tax withholding? This is premium content

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

What tax statement will I receive from my broker after a sale of company stock? What key facts should I know about it? This is premium content

Form 1099-B or the equivalent substitute statement is necessary for the accurate completion of your tax return. Five facts you must know about this reporting to avoid tax-return mistakes are...

If I need to file an extension to complete my tax return after the IRS deadline, are there any mistakes I should avoid that involve stock grant income?

In any tax year, stock compensation income, such as from an NQSO exercise, an ISO or ESPP disqualifying disposition, or the vesting of restricted stock, can raise your income tax and make your return complex. Mistakes include not paying taxes owed with...

In what ways can I pay my taxes if I don't have the money to pay them with my tax return?

If you simply lack the funds to pay your income tax, you may want to apply for a payment agreement on the...

What is the impact of past tax increases on my restricted stock grants? This is premium content

Increases in tax rates indirectly affect the value of grants. Most importantly...

I received a notice (CP-2000) from the IRS stating that, according to last year's tax return, I owe money for the sale of my restricted stock when it vested. I thought I paid all the taxes through withholding at vesting. How do I respond? This is premium content

Because the value of the shares at vesting was added to your W-2, and withholding taxes were based on that value, you thought you did not need to file Schedule D with your Form 1040 to report the sale. It is a common mistake to think this...

Can the IRS seize stock options or restricted stock under a tax lien? This is premium content

The IRS can seize your stock options if it applies a federal tax lien to you for unpaid taxes. After seizing your stock options, the IRS can also...

Will my income from restricted stock vesting be netted against my short-term capital losses from this year (or those that were carried forward from last year)? This is premium content

The value at vesting is all ordinary income. You have capital gain only for the increase in the stock price after vesting. Only this gain at sale can be...

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

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...

Should I set up a Rule 10b5-1 trading plan to cover the stock I will sell or surrender to pay withholding taxes when my restricted stock vests? This is premium content

Both Rule 10b5-1 and the broader use of restricted stock and RSUs are new, so practices and procedures are evolving. Companies are considering the widespread use of Rule 10b5-1 plans for this...

When I take an international assignment, will taxes on my stock compensation be equalized? This is premium content

At some companies, international assignments are often accompanied by what is commonly called an equalization package. To give you an incentive to accept the international assignment, the company agrees to...

What is the tax treatment of my restricted stock in an acquisition? This is premium content

This depends on how grants of restricted stock or RSUs are treated under the terms of the acquisition or merger. For example, if the vesting is accelerated, then you will be...

Are my stock grants affected by the rules of deferred compensation under IRC Section 409A? This is premium content

A number of tax law provisions and interpretations that may affect your stock grants occur in...

UPDATES! Will my company be able to take a tax deduction for the value of my restricted stock, restricted stock units, performance shares, or stock options if my compensation already exceeds $1 million? This is premium content

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...

How soon after my restricted stock vests must the IRS receive my withholding taxes? This is premium content

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...

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

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

What happens with taxes on restricted stock or RSUs if I live or work in different states during the period between grant and vesting? This is premium content

There is no simple answer to questions involving the taxation of mobile employees. Generally, each state you live in determines what income is taxable and when. For administrative ease, many companies...

If I move to another country to work, will I still have to pay US taxes on option exercises, restricted stock vesting, and stock sales? Can I avoid double taxation? This is premium content

The United States taxes the worldwide income of US citizens regardless of whether the income arises from activities in the US. In addition, the other country may impose taxes too. But the US has tax treaties with certain nations to help taxpayers avoid double taxation...

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

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

If I leave my company to become a consultant, retire, or take another job, will taxes be withheld from my equity grants as they were when I was an employee? What if I live in another state when I receive the income? This is premium content

Most companies base withholding on your employment status at the time of grant. If you work elsewhere or are retired at exercise or vesting, then...

Can stock option, restricted stock, or ESPP income alone qualify me to establish an IRA? This is premium content

As long as you meet the other requirements, to be eligible to make contributions under the tax rules you must have "compensation income" that is at least equal to...

I am eligible for vesting acceleration at retirement but have not actually retired, so why has my restricted stock been taxed? Is the treatment different for RSUs? This is premium content

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...

The value of my restricted stock at vesting is reported on my W-2 as ordinary income. Can I use my stock-trading losses to offset this income? This is premium content

You have different types of taxable income. The tax law says you can offset losses against only the...

Is the vesting of my restricted stock a "wash sale"? This is premium content

The wash sale rule disallows the loss on a sale of stock if the same type of stock is...

Upon my death, the vesting of my restricted stock would accelerate. How would the value be taxed as part of my estate? This is premium content

Typically, all or a pro rata portion of any restricted stock vests at death. The value of restricted stock that vests and is payable at your death will...

When someone dies with a restricted stock grant, do tax withholding and reporting apply if the vesting is accelerated or allowed to continue? This is premium content

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...

What are the federal income tax consequences if my estate or beneficiary sells stock that I received from a prior option exercise or from restricted stock vesting? This is premium content

For federal income tax purposes, your estate or beneficiaries will receive a "step-up" in the tax basis of the shares to the market value of the stock at the time of death...

Does the accelerated vesting of my stock options, restricted stock, and/or performance shares in a change of control or termination have any tax impact on me, such as for ISOs and golden parachute payments? This is premium content

With stock grants of normal size, you face no tax impact beyond the standard tax treatment. ISOs may be converted to NQSOs should any acceleration of vesting cause...

My company's stock is now essentially worthless because of securities fraud by senior executives. Can I claim a casualty or theft loss on my tax return? This is premium content

A casualty or theft loss would allow you to deduct the lost amount against your ordinary income, subject to some limits. However, Treasury regulations and court rulings would probably stand in your way. Nevertheless, what you can do is...

What are some year-end strategies for restricted stock, RSUs, and stock options? This is premium content

Decisions in year-end financial and tax planning depend on several factors. In this FAQ, we present several situations and some strategies that many experts suggest. Of course, you should...

The value of my restricted stock has fallen since vesting. If I sell my shares at year-end, do I get a credit for the income tax I paid at vesting, or do I net the loss against capital gains? This is premium content

The vesting and the sale are separate transactions and generate different types of income. Unless you made an 83(b) election to be taxed at grant, you were first taxed on the stock's value at vesting, which created ordinary income to you. With restricted stock units (RSUs), taxation occurs...