1. Be taxed under last year because that's when the RSUs vested,
2. Be taxed under this year because that's when the stock is (or hopefully will be) delivered, or
3. Be taxed under last year, and be subject to a 20% penalty, for violation of section 409A rules regarding deferred compensation?
But every place I've read, it says that RSUs are taxed when you receive the shares, which is "almost always" at vesting, but isn't in my case. And in fact, I've read that some plans allow you to defer receipt of the shares, which defers the income taxes, which contradicts your statement.
It is hard to believe that your situation will be different. Your case is not finalized yet as company didn't give your shares yet. Let me give you an example of a scenario.newacct wrote: ↑Fri Feb 07, 2020 2:17 pmBut every place I've read, it says that RSUs are taxed when you receive the shares, which is "almost always" at vesting, but isn't in my case. And in fact, I've read that some plans allow you to defer receipt of the shares, which defers the income taxes, which contradicts your statement.
Assume i am granted 160 shares worth of RSUs last year and they start vesting this year with ,25% of total shares each year. I see that i will be granted 40 shares this year in E trade. (25% of 160 shares) and when the day comes a surprise! I only see that i have 24 shares is mine because company cut 16 shares for taxes (40% of shares). This repeats in the the following years as well.
As someone else said, they should be taxable upon vesting. The delay of receipt seems to me to be an administrative processing error on the part of your employer and not something which should impact the year they are taxable.
Push your employer to get their act together.
RSUs are taxed upon DELIVERY, which CAN BE the same time as vesting, but NOT always. The term that is used in the IRS code is "constructive receipt", that is, income is taxed upon the constructive receipt of the income by the recipient. For RSUs, the Company can elect what day is considered the date of constructive receipt. It could be the day the shares vest, with the number of days it takes to administratively deliver the shares deemed to be immaterial, or the Company could determine the date of constructive receipt to be the day the shares are actually delivered to the recipient (perhaps via deposit into to their brokerage account for a publicly traded company) and the recipient has the ability to monetize those shares. All of this is normally laid out in the Company's RSU plan documents and their election is filed with the IRS.
Many companies are public and choose to delay delivery of the RSUs until they open their trading window, as a method to curtail insider trading. For example, my company grants RSUs as a part of annual compensation and they have a vesting date of 12/31 each year. However, the company does not actually deliver the RSU's until we release our earnings, normally in early February. In this instance, my Company has elected the date of delivery, which is 30+ days after vesting, to be the date constructive receipt and thus the date the RSUs become taxable. On this date, my Company deposits the shares into my brokerage account and issues me a pay slip detailing the taxable income (number of shares x share price on the day of delivery), and applicable withholding amounts. At our Company we have the ability to pay the taxes in cash and receive the gross shares or we can "net share settle" with the company delivering an amount of shares net of the taxes.
As always, a simple statement of "always on vesting" is not correct.
Google it and you'll find articles such as https://www.schwab.com/public/eac/resou ... facts.html stating things such as "With RSUs, you are taxed when the shares are delivered, which is almost always at vesting."
I don't have IRS info, but have knowledge of a number of corporate plans that, for example, vest on a certain date and then are delivered in 20% installments over the next 5 years. Employees are taxed on delivery, not vesting. I haven't seen any examples that contradict this.
Why didn't you ask Jack FFR1846 to explain, with citations?