How are Restricted Stock Shares taxed when selling after vesting?

The tax treatment of your restricted stock shares actually happens in two phases. When your shares vest, that's considered ordinary income - basically like getting a cash bonus - and that's why your company withheld some shares for taxes (they're required to). The value of ALL shares at vesting is added to your W-2 income. The withholding might not cover your entire tax obligation though, depending on your tax bracket and the withholding rate your company used. If you sell the remaining shares immediately after vesting at basically the same price, you'll have little to no additional tax impact. However, if you hold the shares and they increase in value before selling, you'll owe capital gains tax on the difference between the vesting value and what you sold them for.

After going through something similar last year, I found an amazing tool called taxr.ai (https://taxr.ai) that really helped me understand my RSU tax situation. My company offered a similar stock program and I was totally confused about whether I'd owe more taxes after selling. I uploaded my vesting statements and transaction records to taxr.ai and it analyzed everything, breaking down exactly what portion was already taxed at vesting and what would be subject to capital gains. It saved me from making a costly mistake where I almost double-counted my income! It also showed me how to properly report everything on my tax return.

Just wanted to follow up - I ended up trying taxr.ai after my last comment and wow, I'm impressed! I've been struggling with RSU taxes for 3 years and always worried I was doing something wrong. The tool found that I'd been using the wrong cost basis for some of my shares from previous years. It showed me exactly how my vesting and subsequent sale created two separate taxable events. Now I finally understand why I kept getting unexpected tax bills every April! It generated a detailed report explaining everything that I can reference when I file. Definitely recommend it to anyone dealing with equity compensation - it made this whole restricted stock tax situation much clearer.

If you're having trouble getting answers about your RSU tax situation from the IRS, I highly recommend trying Claimyr (https://claimyr.com). I spent WEEKS trying to get through to an IRS agent to clarify how my RSUs should be reported alongside my other income, and kept hitting dead ends with automated systems. I was ready to give up when a colleague suggested Claimyr. They have this smart system that navigates the IRS phone tree for you, waits on hold, and then calls you when an actual human agent is on the line. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c My issue was that I had incorrect cost basis info on my 1099-B that didn't match what was on my W-2, and I needed to clarify what to do. The IRS agent I spoke with walked me through exactly how to handle the discrepancy.

I need to eat my words about my skepticism! After posting my comment yesterday, I decided to try Claimyr since my RSU tax situation was really stressing me out. I couldn't believe it actually worked. I submitted my request around 3pm, went back to work, and about 2 hours later got a call connecting me with an IRS tax specialist. The agent clarified exactly how to reconcile the differences between what my employer reported on my W-2 and what the brokerage reported on my 1099-B for my RSUs. Turns out there's a specific adjustment you need to make on Form 8949 to avoid double taxation. I've been doing this wrong for YEARS and probably overpaid thousands in taxes. Now I'm going to file amendments for my past returns.

One thing nobody's mentioned yet - watch out for the AMT (Alternative Minimum Tax) if you have substantial RSU income! My first big vesting pushed me into AMT territory last year and I got hit with a much higher tax bill than expected. Also, consider the timing of your vesting dates in relation to your other income. If you know when your RSUs will vest, you might want to adjust your 401k contributions or other deferrals around those times to help manage your tax bracket.

Has anyone dealt with restricted stock that vested while working in multiple states? My company is in California but I was working remotely from Colorado for part of the vesting period. Now I have no idea how to calculate which state gets what portion of the tax!

This is such a common confusion with RSUs! I went through the exact same thing last year. Here's what I learned: When your RSUs vest, your company is required to withhold taxes at the supplemental wage rate (usually 22% or 37% depending on the amount). However, this withholding is often not enough to cover your full tax obligation, especially if you're in a higher tax bracket. The key thing to understand is that the FULL fair market value of all vested shares gets added to your W-2 income - not just the ones you kept after withholding. So if 100 shares vested at $50 each ($5,000 total value), that entire $5,000 goes on your W-2 even if they only gave you 78 shares after withholding 22 shares for taxes. If you sell immediately after vesting at roughly the same price, you'll have minimal capital gains impact. But you might still owe additional ordinary income tax when you file if the withholding wasn't sufficient for your tax bracket. I'd recommend calculating what your effective tax rate will be with the additional RSU income and compare it to the 22% they withheld. If there's a gap, consider setting aside some of your sale proceeds for taxes or make an estimated payment to avoid underpayment penalties.

Just want to add another perspective on the timing aspect that might help with your decision. Since you mentioned the stock has been volatile and you have more shares vesting in coming months, you might want to consider your overall tax strategy for the year. If you sell now, you'll realize any small capital gains/losses immediately. But if you hold and the stock drops significantly before your next vesting dates, those future vests will be taxed at the lower market value (which could actually be beneficial from a tax perspective, even though it's bad for your portfolio value). On the flip side, if you're already in a high tax bracket this year due to the current vesting, spreading out the tax impact might not matter much. In that case, taking the guaranteed proceeds now (as you mentioned wanting to do) is probably the safer play. One more thing - if you do decide to sell, make sure you understand which specific shares you're selling if you have multiple vesting dates. Most brokers default to FIFO (first in, first out), but you can sometimes specify which tax lots to sell to optimize your capital gains treatment. This becomes more important as you accumulate more shares over time.