Box 14 Restricted Stock: A Guide to Reporting RSUs and Stock Grants

Restricted stock, also known as RSUs, can be a complex topic, especially when it comes to reporting and taxes.

RSUs are a type of equity compensation that is granted to employees in the form of company stock, but the employee doesn't actually receive the stock until it vests.

The value of an RSU is typically determined by the company's stock price at the time of vesting, and it's subject to income tax withholding.

As an example, let's say you're granted 100 RSUs with a value of $10 each, and the company's stock price is $50 at the time of vesting. The total value of your RSU grant would be $1,000.

Broaden your view: Restricted Stock Vesting

RSUs, or Restricted Stock Units, are an option for businesses to compensate employees in addition to their regular pay. They are often used in the tech industry.

RSUs are called restricted because certain circumstances have to be met for them to "vest" and have value. This is typically based on a vesting schedule or performance goals.

A vesting schedule provides a timeline for when stocks become available to the employee, often tied to staying at the company for a certain length of time or meeting specific performance goals.

Here's a breakdown of what you need to know about RSU taxation:

Once your RSUs vest, their fair market value is considered ordinary income and is taxed the same way as if you had received the same amount in cash.

An RSU vesting schedule is a timeline that outlines when stocks become available to the employee, often based on performance goals or length of time at the company.

The schedule provides a clear picture of when the restriction(s) are met, and the RSUs can be exchanged for stocks promised and due.

RSUs can be different based on the restrictions in the vesting schedule and other RSU documents, so it's essential to review your specific agreement.

Some RSUs may only require a certain number of years for the RSU to fully vest, while others may require both time and performance metrics to be met.

It's crucial to review your RSU vesting schedule and other documents to understand the specific restrictions on your RSU(s).

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Stock grants are a form of compensation where employees receive stock directly, rather than Restricted Stock Units (RSUs). This type of grant is often subject to vesting requirements, which can be a time period, a performance metric, or other agreed-upon criteria.

A common example of a stock grant is when a company grants an employee 1,000 shares of stock with a vesting period of two years. This means the employee will receive the shares only once they've vested at the end of the two-year period.

Stock grants can be beneficial for employees, as they provide a direct ownership stake in the company. However, they also come with tax implications, which we'll discuss later.

Here's a quick rundown of how stock grants are reported on your W-2:

RSUs are taxed as soon as they vest, regardless of whether you sell them or not. This can be a nasty surprise for employees who aren't prepared.

The amount of taxes owed on RSUs is reported in Box 14 of your W-2 form, listed as "RSU" income. You'll also see any sell-to-cover withholdings combined with your regular withholdings in boxes 2, 4, and 6.

If your RSUs are worth $1 million or less upon vesting, your sell-to-cover withholding percentage is 22%. This means you'll likely take a hit tax-wise. Make sure you're paying quarterly estimated taxes and saving enough of that RSU money to pay any taxes you might owe.

For RSUs worth over $1 million, the withholding percentage for sell-to-cover is 37%. This is equal to the top tax bracket currently in place.

Here's a breakdown of what you can expect to see on your W-2:

RSUs are listed on your W-2 in the "Other" category, specifically in Box 14.

The amount listed in Box 14 needs to be translated to your federal tax return, and if applicable, your state tax return(s).

A fresh viewpoint: Jack in the Box Ticker Symbol

You'll need to review your W-2 to determine if your employer withheld enough funds to cover the taxes owed.

If not, you'll need to adjust your taxes due accordingly.

Once your stocks are vested, you'll need to determine the basis for the stocks.

You'll then record any gain or loss from the sale by subtracting the amount earned by the sale from the basis of the stock.

This information will be reported on Schedule D and Form 8949 of your federal tax return.

For another approach, see: Restricted Stock Units Cost Basis

RSU types can be beneficial for both employers and employees. There are two main types of RSUs: Restricted Stock Units and Stock Grants.

Restricted Stock Units provide employees with an incentive to stay with the company for longer to receive company shares at their vesting time. Employees are encouraged to perform well so that the shares that they own increase in value.

RSUs also offer administrative cost savings for employers, as they don't have to record and track actual shares. This can be a significant advantage for companies.

Here are some key benefits of RSUs at a glance:

RSUs can have varying vesting schedules, with some requiring employees to meet a certain number of years for the RSU to fully vest.

Each RSU is unique based on its restrictions, such as vesting schedules and performance metrics.

Some RSUs may only require a certain number of years to vest, while others may require both years and performance metrics.

It's essential to review your specific RSU vesting schedule and documents to understand the restrictions on your RSU(s).

RSUs provide employees with an incentive to stay with the company for longer to receive company shares at their vesting time.

This is a key benefit for tech companies, as it helps reduce turnover rates and retain top talent.

Administrative costs associated with RSUs are minimal for employers, as these aren't actual shares that need to be recorded and tracked.

This means fewer resources are required to manage RSUs, making them a cost-effective option for companies.

With RSUs, the company can defer issuing shares until the vesting date, allowing delaying the dilution of shares.

This gives companies more flexibility in managing their stock options and minimizing the impact on existing shareholders.

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Box 14 restricted stock is a type of equity compensation that's often used to attract and retain top talent.

The IRS requires companies to report restricted stock units (RSUs) on Form 3922, which is sent to the employee and filed with the IRS.

Restricted stock units can vest over time, but they're not considered income to the employee until they vest.

Vesting periods can vary, but they often range from one to five years, depending on the company's policies.

The fair market value of the stock is used to determine the income tax owed on the RSUs.

Companies can choose to grant RSUs with a fixed vesting schedule or a performance-based vesting schedule.

Additional reading: Restricted Stock Income