Finny logo
Dibs:
Dibs:
0
J
Employee stock grant
I'll get a $15k in stock grant that vests over 3 years for good performance. Don't know much about them other than that they are in the form of RSU. Grant date will be in Dec of this year and 33% will vest in the same month of 2022 until 100% vests in Dec of 2024. Despite trying to find resources online I canโ€™t fully grasp how these get taxed? I understand that I can sell them only when they vest. Also, do RSUs change how I get paid or how my pay is reported on my W2? Thanks in advance.
Reply
+ Emoji
S
When the first chunk (or 1/3) of your shares vest in 12/2022, the value of the vesting shares will be included on your W-2 and therefore considered compensation along with any tax withholding. Your company may sell some of the shares to cover tax withholding requirements. If that's the case, you will also receive a 1099-B from the broker and usually will only have a very small gain or loss impact.
๐Ÿ‘
1
๐Ÿ’ก
1
Reply
+ Emoji
J
@Shaun344 Thanks! What does the tax withholding requirement exactly mean?
Reply
+ Emoji
S
@Justin490 It just means that the brokerage firm will sell a portion of the shares when your shares vest to pay the estimated taxes on the vesting amount.
๐Ÿ‘
1
๐Ÿ’ก
1
Reply
+ Emoji
J
With 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 rate - Social Security (up to the yearly maximum) and Medicare - state and local taxes, when applicable A 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.
๐Ÿ’ก
3
Reply
+ Emoji
J
@JoelTheK This is so helpful, thank you!
Reply
+ Emoji