Global Tax Guide
Top 10 questions to ask about a grant of restricted stock/RSUs
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FAQ 1: What are the top 10 questions I should ask about my grant of restricted stock or RSUs?
You should know the answers to the following questions. Understanding the topics involved will help you make the most of your restricted stock/RSU grant and prevent costly mistakes.
1. Do I have a grant of restricted stock or a grant of restricted stock units? What are the key differences?
2. Is formal acceptance of the grant required? What happens if I don't accept the grant before vesting?
3. What is the vesting schedule?
4. Is vesting based on duration of employment or on performance goals?
5. What would happen to the vesting of my grant if I were to leave or lose my job, die, become disabled, or retire?
6. When the shares vest, what account will they appear in?
7. How does the tax withholding work?
8. With RSUs, can I defer the delivery of the shares at vesting?
9. If my company pays dividends to shareholders, will I get dividends on my restricted stock? If so, when? What if I have a grant of RSUs instead?
10. What would happen to my restricted stock in a corporate acquisition or merger?
In addition, you should understand the tax treatment, the reporting on your Form W-2 (whether for restricted stock or RSUs), and the related tax return reporting. This website's Tax Center covers all tax topics involving stock compensation.
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FAQ 2: My restricted stock/RSUs will vest soon. Should I sell the shares at vesting or hold them?
When restricted stock, restricted stock units, or performance shares vest, whether you sell or hold the shares depends on various factors. Some of these factors, especially personal ones, are under your control, while others stem from your company's plan or the tax rules.
- Taxes. Shares can be a source of the proceeds needed to pay taxes at vesting. Proceeds for tax withholding can come from net share settlement or a sale of shares.
- Tax planning. Whether you hold the shares and for how long will affect your capital gains tax at sale. Any holding period after vesting does not affect the amount of income tax due for the value of the shares at vesting.
- Your cash needs, upcoming life events, and other financial-planning factors, including diversification, dividends paid on your stock, and alternative investments.
- Whether your company is publicly traded or privately held. At public companies, be aware of blackouts when you can't trade or stock ownership/retention guidelines that require you to keep a certain amount of company stock. In a privately held company, you will not be able to sell the shares immediately at vesting because of restrictions that are likely to exist in your grant and/or because of the SEC rules on resales.
Calculations in the Restricted Stock & RSUs Comparison Modeling Tool on myStockOptions.com can help you decide. If you are not comfortable with making these decisions on your own, discuss strategies with a financial advisor. This is particularly helpful if you are thinking about holding the stock at vesting and systematically selling shares over time or at set price points, or if company shares represent at least 10% of your net worth.
For more on this topic, see the full FAQ.
Restricted stock, restricted stock units (RSUs), and restricted securities are often confused by employees, companies, and financial advisors alike. While RSUs have become the most popular type of equity award, we continue to see many people inaccurately call RSUs "restricted stock" or even "restricted securities." That lax terminology can be problematic and confusing. Those three things are not the same—and the differences matter. As a lawsuit by current and former Uber employees shows, it is important to know what type of stock grant you have and its tax treatment.
In a new article at myStockOptions, we explain the important differences between restricted stock, RSUs, and restricted securities.
Exclusive articles on restricted stock, restricted stock units (RSUs), and performance shares at myStockOptionsBelow we list articles, videos, podcasts, and interactive quizzes about restricted stock, RSUs, and performance share in the award-winning multimedia content of myStockOptions.com.
The extensive section on restricted stock and RSUs at myStockOptions.com is complemented by a self-study course and exam for CFP and CEP continuing-education credits. All of this content is available with Premium or Pro Membership or through corporate licensing.
ARTICLES
Ten Financial-Planning Rules You Should Know About Restricted Stock And RSUs by the myStockOptions Editorial Team
While grants of restricted stock and RSUs are conceptually simple, financial planning for them can be complex. This article presents the essential financial-planning points that you should consider before your restricted stock or RSU grant vests.
Restricted Stock Units Made Simple (Part 1): Understanding The Core Concepts by the myStockOptions Editorial Team
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.
Restricted Stock Units Made Simple (Part 2): Taxation by the myStockOptions Editorial Team
The taxation of RSUs generally resembles that of restricted stock but carries some important differences, as this article explains.
Restricted Stock 101: Five Essentials Of Restricted Stock & RSUs by the myStockOptions Editorial Team
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.
NEW! Restricted Stock, Restricted Stock Units, Restricted Securities: How To Tell Them Apart And Avoid Confusion by the myStockOptions Editorial Team
Restricted stock, restricted stock units (RSUs), and restricted securities are often confused by employees, companies, and financial advisors alike. That can be problematic. Those three things are not the same—and understanding which you have matters, as a lawsuit by current and former Uber employees demonstrates. This article explains the differences..
The Great Benefits Of Restricted Stock And RSUs by Richard Friedman
Podcast included! Your company may no longer be using stock options. Instead, it may be granting restricted stock, restricted stock units, or performance shares. While these grants don't carry the same upside as stock options, they have benefits you will surely appreciate once you understand their special features.
Financial Planning With Restricted Stock Units: 3 Key Questions by Daniel Zajac, CFP®
If you own restricted stock units (RSUs), you need to plan for what you will do when the shares vest. Whether you hold or sell, being prepared will help you be proactive instead of reactive and make the most of the opportunity RSU grants provide.
What To Do With Your Just-Vested Shares After Your Company's Stock Price Drops by Meg Bartelt, CFP®
When markets are on a wild ride, stock volatility can rattle anyone's financial plan for equity comp and company shares. What should you do with shares acquired from equity awards now? Should you change your strategy or ride it out? This article provides a financial planner's insights.
Restricted Stock: Tax, Financial, Estate, And Retirement Planning (Parts 1 and 2) by Richard FriedmanPodcast included! Understand financial planning for restricted stock and RSUs. Part 1 discusses the growing popularity of these grants, their special features, and the related tax planning. Part 2 covers complex issues in financial, estate, and retirement planning.
Stockbrokers' Secrets: Restricted Stock And Performance Shares by John Barringer
For many employees, receiving restricted stock, restricted stock units, or performance shares adds a new layer of complexity to their equity compensation. This article presents six common questions the author hears from his clients.
Performance Shares (Parts 1, 2, and 3) by Bruce Brumberg
Part 1 explains the basics of performance share grants. Part 2 explores their structure in depth, along with the concept of expiration and the impact of job termination. Part 3 explains the taxation of performance share grants and then goes on to discuss the special tax considerations that arise in corporate mergers and acquisitions.
Decisions At Grant With Restricted Stock (Parts 1, 2, and 3) by Tom Davison
Part 1 presents what you need to know at grant and the decisions you can make. Part 2 discusses the risks of the Section 83(b) election. Part 3 explains ways to analyze your alternatives.
Decisions At Vesting With Restricted Stock (Parts 1 and 2) by Tom Davison
Vesting is another crucial time for making decisions about your restricted stock. Part 1 explores what tax-withholding method to use, whether you should hold or sell the stock, and what account to keep the shares or cash in after vesting. Part 2 looks at key vesting decisions.
VIDEOS
Restricted Stock & RSUs (Part 1): Key Aspects To Know
Editor-in-Chief Bruce Brumberg presents the fundamentals of restricted stock and RSUs to help stock plan participants make the most of these grants. The coverage includes key concepts, such as vesting schedules and understanding a grant's value. Running time: 4:37.
Restricted Stock & RSUs (Part 2): Taxes And Related Key Decisions
An engaging primer on the basic tax treatment of restricted stock and RSUs, including the tax rates, the timing of taxation, and withholding. Running time: 3:57
PODCASTS
Basics Of Restricted Stock And Restricted Stock Units
Running time: 8:05. In this audio interview, the editor-in-chief of myStockOptions.com explains how restricted stock and RSUs work, including grant, vesting, sale, and taxation.
Why Restricted Stock And RSUs Are A Good Deal
Running time: 11:37. Compensation expert Richard Friedman explains what makes restricted stock and restricted stock units valuable equity awards. This interview is a companion to Mr. Friedman's article on this topic in the Restricted Stock section of myStockOptions.com, where he also has articles on financial and tax planning for restricted stock and RSUs.
Restricted Stock Units After An Acquisition: Know What Could Happen
Running time: 13:36. When a company is merging or being acquired, its employees wonder what will happen to their unvested RSUs. In this interview, wealth advisor Kristin McFarland explains the potential outcomes for holders of unvested RSUs and current equity holders in an M&A deal. This interview is a companion to her article on this topic.
INTERACTIVE COURSES/EXAMS/QUIZZES
Learning Center: Course on Restricted Stock, RSUs, and Performance Shares for CE Credit
This course and exam, offering continuing education credits for CFPs, CEPs, CWPAs, CIMAs and other professional designations, weaves all of our key articles, FAQs, podcasts, and videos on restricted stock, RSUs, and performance shares into a dynamic, interactive learning tool.
You can also test your smarts with our free interactive quizzes on restricted stock and restricted stock units. In addition to being fun, the quiz is also a course of study. The answer key links to content on the topic for followup reading.
Join us on Oct. 21 (2:00pm–3:40pm ET, 11:00am–12:40pm PT) for a special myStockOptions webinar: Stock Compensation Bootcamp for Financial Advisors. Learn what you need to know about stock options, restricted stock, RSUs, and ESPPs to effectively serve clients, build wealth, and prevent costly mistakes. Whether you are new to stock comp or want to sharpen your knowledge, this webinar will provide practical information and insights to maximize your success.
Registration is open. The webinar offers 2.0 CE credits for (applications pending):
- Certified Financial Planners (CFPs)
- Certified Equity Professionals (CEPs)
- CPWA and CIMA
| myStockOptions Learning Center offers convenient continuing education (CE) credits |
Including our popular course on restricted stock, RSUs, and performance shares, the myStockOptions.com Learning Center has self-study courses and exams that offer continuing professional education:
35 CE credits for Certified Equity Professionals (over 100% of the total requirement)
18 CE credits for Certified Financial Planners (60% of the total requirement)
21 CE credits for CPWAs and CIMAs (52.5% of the total requirement)
Potential self-reportable CPE for Certified Public Accountants (CPAs) and CE for CFA Charterholders (see the Learning Center for information)
Each course of study features podcasts, articles, and FAQs from myStockOptions.com. They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning.