Because RSUs cannot be transferred, divorcing spouses may agree to transfer a portion of the stock (or money) as the RSUs vest. Preparing a contract that correctly accomplishes this and addresses the tax consequences requires some sophistication.
How do I report sales tax on RSU?
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.
How much do you get taxes on RSUs?
Many companies withhold federal income taxes on RSUs at a flat rate of 22% (37% for amount over $1 million). The 22% doesn’t include state income, Social Security, and Medicare tax withholding. For people working in California, the total tax withholding on your RSUs are actually around 40%.
How are RSUs handled in a divorce?
Any RSUs earned during a marriage are community property. Unless a prenuptial agreement specifies otherwise, they will be divided during a divorce action.
How do I report cost basis for RSU?
For RSUs, the cost basis should be the fair market value (FMV) of the shares on the day they vest. This should be listed on your 1099-B from E-Trade, but perhaps not. If it’s missing or $0, you’ll need to adjust your basis to avoid being double taxed.
Are restricted stock units an asset?
Once RSUs vest, they are considered income. Typically an employer will withhold some of the shares to pay taxes on that income. Once they are yours, you can sell and convert them to cash if you wish, or you can hold onto them.
Can RSU be gifted?
Most tax professionals take the position that unvested RSUs and RSAs are not completed gifts for tax purposes and advise that the underlying unvested shares can likewise not be gifted.
Should you sell RSU immediately?
In most scenarios when your RSUs vest you can sell them immediately and there is almost no tax impact. However, if the stock reverts to the original IPO/Vesting date price, don’t hesitate to sell since there will be no additional tax benefit.
