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Mark D
Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 1304
Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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I recevied a stock bonus from my employer last year. Rather

Customer Question

I recevied a stock bonus from my employer last year. Rather than paying income tax on the bonus out of pocket, I chose to have my employer take the taxes from the bonus. I believe that the deduction from the bonus showed up on my tax return as income. What documentation will I need to prove that taxes were withdrawn from the bonus when I chose to sell the stock?
Submitted: 7 years ago.
Category: Tax
Expert:  Mark D replied 7 years ago.
Customer

 

What type of stock bonus was this? Do you still have the stock?

 

Regards,

 

Mark D

Customer: replied 7 years ago.
I don't have my paper work in front of me at the moment but, I believe the bonus was common stock. One third of the total bonus vested after my first year of employment. I was given paper shares (hardcopy) after the deduction of shares to cover the income tax. I still have the stock.
Expert:  Mark D replied 7 years ago.
Customer

 

So it appears they withheld income tax upon issuance of the shares. The income, and tax withheld, will be reported on your W2 next year. You basis in the stock will be the amount you recognized as ordinary income on the W2. Please let me know if you have further questions.

 

Regards,

 

Mark D

Customer: replied 7 years ago.
That is correct. The first third vested in '08 so the income and tax withheld did show up on my 2008 W2. When I sell the stock, I will only be taxed on the gain from the price at the date of vesting, correct? Will I need any other documentation (other the my 2008 W2) to prove that the tax was originally withheld? Thanks for your help.
Expert:  Mark D replied 7 years ago.
Customer

 

Any gain or loss will be calculated based off of the difference in selling price and the amount you recognized when vested. These would be either capital gains or capital losses. Please note that the income taxes withheld were for the W2 income portion only. Any capital gains would be subject to further tax. Please let me know if you have further questions.

 

Regards,

 

Mark D

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Customer: replied 7 years ago.
Thanks for the help.
Expert:  Mark D replied 7 years ago.
Thank you!

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