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Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2663
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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If you sell shares to cover taxes during the sale of RSU's

Customer Question

If you sell shares to cover taxes during the sale of RSU's are there any other taxes that need to be paid against those shares?
Submitted: 5 months ago.
Category: Tax
Expert:  Mark Anderson replied 5 months ago.
Expert:  Mark Anderson replied 5 months ago. RSUs, you are taxed when the shares are delivered, which is almost always at vesting. Your taxable income is the market value of the shares at vesting. You have compensation income subject to federal and employment tax (Social Security and Medicare) and any state and local tax. That income is subject to mandatory supplemental wage withholding. Withholding taxes, which for U.S. employees appear on Form W-2 along with the income, include the following:federal income tax at the flat supplemental wage rate, unless your company uses your W-4 rateSocial Security (up to the yearly maximum) and Medicarestate and local taxes, when applicableA company may offer a choice of ways to pay taxes at vesting, or it may use a single mandatory method. The most common practice is taking the amount from the newly delivered shares by surrendering stock back to the company. This holds or "tenders" shares to cover the taxes under a net-settlement process, and company cash is used for the payroll tax deposit.When you later sell the shares, you will pay capital gains tax on any appreciation over the market price of the shares on the vesting date.
Customer: replied 5 months ago.
if my company used the above and I paid the taxes at vesting why is the IRS sending me a letter saying that the income was never reported? I can prove that the shares were sold to cover taxes. When I provide the eTrade 1099 along with a year end paycheck summary should that satisfy the IRS?
Expert:  Mark Anderson replied 5 months ago.
Maybe the IRS does not have the W-2 information yet. Yes. I would provide that information. It should show up on your W-2.
Expert:  Barbara replied 5 months ago.
Different expert here - my name is ***** ***** please allow me to provide you with additional information.Based on your original question and the dialogue in this thread, it appears the IRS is saying the income was never reported because the information contained on the W-2 is not sufficient for tax purposes. The information provided by eTrade on the 1099-B should have been entered on your tax return as well as a stock transaction. you amend your tax return to include the 1099-B information, the IRS will be satisfied.Please let me know if I can assist you further.Thank you and best regards,Barb
Expert:  Barbara replied 5 months ago.
Just following up with you to see if you have any other questions or concerns. If so, please come back to me here, and I will be happy to assist you further.Best regards,Barb

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