How do I report restricted stock on my taxes?
How do I report restricted stock on my taxes?
When you receive an RSU, you don’t have any immediate tax liability. You only have to pay taxes when your RSU vests and you receive an actual payout of stock shares. At that point, you have to report income based on the fair market value of the stock.
What can you do with restricted stock units?
Generally speaking, when your restricted stock units vest, you gain full rights and ownership to the value of the units. Often, the value is transferred to you in the form of shares of company stock. However, it is possible that your company can settle the value of the units with cash.
Can you cash out restricted stock?
From an employee’s perspective, once vested RSU shares are received and can be converted to cash through selling the shares, the RSU as a compensation mechanism has served its purpose. The extra compensation is received and is taxed as ordinary income (more on this below).
What is restricted common stock?
Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations.
What is the difference between restricted stock and options?
Restricted shares and stock options are both forms of equity compensation, but each comes with some conditions. Restricted shares are awarded outright, and their owner has the same rights and privileges as any shareholder. Stock options are the right to buy a certain number of shares at a certain price in the future.
Do restricted stock units count as income?
RSUs give an employee interest in company stock but they have no tangible value until vesting is complete. The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares is withheld to pay income taxes.
What are the advantages of using restricted stock to compensate employees?
The advantages of restricted stock bonus/purchase plans are (1) the employee can make the ยง83(b) election; (2) the employee is generally entitled to capital gain treatment on sale of vested stock; and (3) the Company gets a wage deduction without paying cash wages.
Should I take stock options or cash?
If you choose to take the company stock option rather than the cash, you can expect to pay your normal income tax rate when the stock units become fully vested. If you can wait longer than a year after the stock units are vested, then you can expect to pay a long-term capital gains tax rate, which is more favorable.
Should I exercise a call option?
Exercising Call Options If you own a call option and the stock price is higher than the strike price, then it makes sense for you to exercise your call. This way you can buy the stock at a lower price and immediately sell it to the market at the higher price or hold onto it for long term.
