Restricted stock units (RSUs) are stock from a company that you can't sell, transfer or assign until you meet a certain condition, which is determined by the donor. This condition might require you to meet a performance goal or maintain employment for a certain period, also known as vesting. Typically, when you receive property for your services, you must report the property's fair market value in the year you receive the property, but RSUs are different. Because you don't own the stocks until you met the vesting requirement, you shouldn't report the stocks until you receive the stocks.
Reporting Vested RSUs and Dividends
Grab a copy of Form 1040 and the 1040 Instructions from the Internal Revenue Service website.
Look at Box 1 on your W-2, which is the compensation you received from your employer. Also included in this box is the fair market value of your vested RSUs and any dividends received.
Enter the amount from Box 1 on Form W-2 in the line labeled "Wages, salaries, tip, etc." on Form 1040.
Enter the amount in Box 2 on Form W-2 in the line labeled "Federal Income Tax Withheld" on Form 1040. This amount includes taxes withheld by your employer for your wages and RSUs.
Reporting the Sale of Vested RSUs
Download Form 1040 and the 1040 Instructions from the Internal Revenue Service website. You'll also need to grab Form 8949 and Schedule D. When the vested RSUs were released to you, you should've received a Confirmation of Release from your employer. You must also have this statement on hand to determine the fair market value of your shares.
Look at the 1099-B you received to report the sale of the RSUs. If there's an amount listed in Box 3, check "Box A" on Form 8949. If Box 3 doesn’t contain an amount, check "Box B." If you didn't receive a 1099-B, check "Box C." Contact your broker for information on how to proceed with Form 8949. Your broker should offer to send you a copy of the form or additional documents to complete Form 8949. Form 8949 contains two sections -- Part I to report the sale of property you owned for a year or less and Part II to report the sale of property owned for more than a year. If you sold the RSUs the same year you received the stock, use Part I. If you held the stock for more than a year, use Part II. If you're unsure how long you owned the stocks, look at Box 1c on Form 1099-B.
Enter a description of the stock you sold in "Column A" on Form 8949, which should include the number of shares sold and the name of the company.
Enter the date you acquired the stock in "Column B," which is the date the RSUs were vested. Your Confirmation of Release statement should include this information.
Enter the date you sold the RSUs in "Column C," which is listed in Box 1a on Form 1099-B.
Enter the amount the sale price of the RSUs in "Column D" on Form 8949. The sale price is listed in Box 2a on Form 1099-B.
Enter the cost or other basis of your RSUs in "Column E." You should find this amount in Box 3 on Form 1099-B. If Box 3 is empty, this amount represents the fair market value of the stocks on the date the shares were vested. Your Confirmation of Release statement should list this amount.
Subtract Column E from Column D and enter the amount in "Column H." This amount represents the gain you received from the sale of the RSUs.
Complete the remaining calculations on Form 8949 to determine your total gain or loss from the sale of your RSUs. Include the sale of any other capital property in this form.
Transfer your total gain or loss to the appropriate row on Schedule D. The row you should use depends on the box checked on Form 8949. For short-term property, use Part I and use Part II for long-term property.
Follow the instructions on the bottom of Schedule D to determine your total gain or loss from the sale of your capital property. This procedure differs according to the property sold and whether you had a capital gain or loss.
Transfer the amount of your capital gain or loss to the line labeled "Capital Gain or Loss" on Form 1040.
- Fidelity: Restricted Stock Units (RSUs)
- Internal Revenue Service: Publication 525
- E*TRADE: Reporting the Release and Sale of Restricted Stock on Your Tax Return
- IRS. "Publication 15: Employer's Tax Guide," Pages 19-20. Accessed Aug. 17, 2020.
- IRS. "General Instructions for Forms W-2 and W-3," Page 22. Accessed Aug. 17, 2020.
- IRS. "Publication 525: Taxable and Nontaxable Income," Page 14. Accessed Aug. 17, 2020.
Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.