I've gotten an equity award from my company; 65 stock units that vest after a year, currently worth $2500. DH says that it's not worth the additional tax headaches it will cause. I don't know if we will have to file quarterly for self-employment taxes or something like that, in addition to the shares they deduct when it vests. I will likely be getting one each year. I have to fill out a form, however, to accept the award. Help? Here's some of the relevant verbiage. " Your grant is restricted, meaning that it is subject to certain terms and conditions that must be met before you take ownership of the shares.... Once the time restriction is met, the RSU restriction will be removed and you will own the shares. A taxable event will occur once you have ownership of the shares. Our payroll department will calculate the required tax withholding and we will withhold the appropriate number of shares from your grant to meet the required tax withholding." Does this mean they just deduct the appropriate number of shares and it won't be a tax headache until I cash in the shares, which I don't plano on doing for quite some years? Or will we have to file quarterly self-empolyment taxes and/or have add'l forms to fill out every year in April? Just take me at my word that I don't have someone helpful to ask at work. It's a PT telecommuting job in another state.
You need to talk to a ax professional. Do not mess with the IRS. Excuses like "I didn't know" does not fly with IRS when you have done something wrong, even if you truly didn't know.
Talk to a professional. Find one if you don't have one. Call the IRS and get a reference.. NOT some tax source like HR Block in a box... a Professional.
From what you printed, it does sound like they will withhold the taxes by reducing the shares that they grant you - so if they are still worth $2500 a year from now, the amount of shares that you will own a year from now will be equivalent to $2500 minus whatever your tax withholding would be. That is a one-time transaction.
I'm a little lost on the self-employment taxes...this has nothing to do with self-employment so no, there's no quarterly filing or anything.
If you make transactions in the stock during the year (sell some at a profit or a loss), the broker will send you a form at the end of the year for you to account for your capital gains or losses for tax purposes. If you lose money, you get a little bit of a deduction and if you make money, you have to pay taxes on it at the capital gains rate.
Welcome to the world of owning stock - it's not a headache, it's a nice benefit.
I'd be worried about not accepting your stock bonus award, if that's really what your husband is thinking here. It might make you look bad to your company and make them feel that you aren't worthy of future promotions or bonuses.
You might have to pay more for the tax help, but don't shoot yourself in the foot here with your company.
Food for thought and an opinion you might not have thought of.
Dawn
It looks like you got shares at today's price that you will be able to claim yours in a few years. Nothing to worry about :)
When the time comes you will become an owner of these shares. Your payroll will give you a sheet that states what was the original price at the time of purchase and what is the price today, if you made money, They will deduct an appropriate tax amount at the time of transferring shares to you. At the tax time you fill out a form and state that you became a share owner and paid the tax already. It is that simple. It is just like getting a gift that you have to pay tax on. Enjoy!
It sounds like a stock bonus? In that case the value of the shares is considered income and it sounds like your payroll department will be applying withholding. I am really not sure but usually it will show up as ordinary income on your W-2 for the year the transaction occurs.
Not sure how good they are with records so you will want to know what the value of the shares are when they calculate the transaction and you take ownership. This is your basis and becomes the nontaxable part of the value. When you sell the shares if the amount is higher than the basis you will pay capital gains tax on the difference, if it is lower you will report a loss.
Shouldn't be a tax headache. They will tax the stock like any other bonus you would receive. You would pay the tax after the vesting period when you actually receive the stock. And no, they will not deduct any shares to pay for the tax.
Please see a tax person for your personal situation as I am not a tax person
