Form 1099-B - Restricted Stock Units and Backup Withholding | TaxAct (2024)

FAQs

What are restricted stock units on a 1099-B? ›

Receiving Form 1099-B for options 1 and 2

If the RSUs fall into the first or second option, you'll receive a Form 1099-B reporting the total sales proceeds for the number of shares sold. (You may receive a 1099-B for option 3 if you sold any of the shares during the current tax year.)

Some investors opt to sell their RSUs right away, before they have an opportunity to gain or lose value. It is a savvy way to minimize these capital gains taxes and avoid RSUs being taxed twice.

Form W-2 (or 1099-NEC if you are a nonemployee) Your W-2 (or 1099-NEC) includes the taxable income from your award. Form W-2 shows the taxes that have been withheld. This form is provided by your employer. Form 1099-B This IRS form has details about your stock sale and helps you calculate any capital gain/loss.

If your Form 1099 shows an amount withheld under the backup withholding rules, report the amount as federal income tax withheld on your income tax return for the year you received the income.

For example, a company may grant 300 RSUs that vest over three years, so each year the employee receives 100 shares of the stock. A year after the grant date, the employee would own 100 shares of the stock, with 200 shares remaining unvested.

When an employee receives Restricted Stock Units, they have an interest in the company's equity, but the units have no tangible value until they vest. Once the RSUs vest, the employee can keep, sell, or transfer the shares, just like any other stock. Companies use RSUs as a form of employee compensation or bonus.

RSUs: RSUs are generally taxed as ordinary income at the time of vesting based on the fair market value of the shares on that date. Employees are responsible for paying income tax (and employment taxes) on the value of the vested RSUs. Any subsequent capital gains from selling the shares are taxed as capital gains.

To avoid double taxation, the employee must use Form 8949. The information needed to make this adjustment will probably be in supplemental materials that come with your 1099-B.

Double taxation occurs when a corporation pays taxes on its profits and then its shareholders pay personal taxes on dividends or capital gains received from the corporation.

This often happens when Form 1099-B isn't properly completed, and the tax advisor doesn't know the shares were a form of equity compensation. If overlooked, you might pay ordinary income taxes on the vesting date and again when you sell the shares.

Do you have to pay tax on restricted stock units? ›

A: RSUs are subject to tax under the Federal Insurance Contributions Act (FICA), which is comprised of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare tax (collectively referred to as payroll tax), for employees with a ...

Tax Implication on Sale of RSU Holdings

If an employee sells his/her RSU holdings, any profit made on that transaction is considered a capital gain. The capital gain is taxable as per its period of holding. The tax is applicable irrespective of whether those shares are listed on the Indian stock exchange.

Credit for backup withholding

If you had income tax withheld under the backup withholding rule, report the federal income tax withholding (shown on Form 1099 or W-2G) on your return for the year you received the income.

Backup withholding is a tax that is levied on investment income, at an established tax rate, as the investor withdraws it. For payments not subject to withholding, payers are required to withhold the tax.

RSUs: RSUs are generally taxed as ordinary income at the time of vesting based on the fair market value of the shares on that date. Employees are responsible for paying income tax (and employment taxes) on the value of the vested RSUs. Any subsequent capital gains from selling the shares are taxed as capital gains.

Restricted stock units are considered income once vested, and a portion of the shares is withheld to pay income taxes. The employee then receives the remaining shares and has the right to sell them.

A: RSUs are subject to tax under the Federal Insurance Contributions Act (FICA), which is comprised of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare tax (collectively referred to as payroll tax), for employees with a ...

If you have RSUs the amount should be shown in box 14 of your W-2 copy. This amount should also be included in the wages (box 1) of your W-2. Box 14 is used by employers to list various items and there is not a standard list of codes, you can use the options for "Other Not Listed Here" in place of RSU Gain.