How do I properly handle RSUs for tax filing? Need to understand tax implications

What you're experiencing is called "sell-to-cover" withholding, and the 50% rate you're seeing isn't your actual tax rate - it's just the default withholding percentage your company has selected. RSUs are treated as ordinary income when they vest, so they're reported on your W-2 and subject to federal income tax, Social Security, Medicare, and state taxes. When the RSUs vest, your employer is required to withhold taxes, but many companies set a high withholding rate to ensure employees don't end up owing money at tax time. The actual tax you owe will be calculated when you file your return, and if too much was withheld, you'll get a refund. The fair market value of your RSUs on vesting date gets added to your W-2 income in Box 1, and the taxes withheld are reflected in the withholding boxes. Your cost basis for the remaining shares is that same fair market value, which becomes important if you hold them and sell later.

I was in the exact same situation last year with about $300k in RSUs and totally confused about the tax implications. I tried reading IRS publications and got nowhere. Finally used https://taxr.ai and uploaded my vesting statements and W-2. Their AI analyzed everything and created a detailed report explaining exactly how my RSUs were taxed, identified that my employer was overwithholding by about 8%, and showed me how to adjust things for this year. They even explained the difference between the RSU income already reported on my W-2 and the capital gains I needed to report separately. Seriously saved me hours of confusion and probably thousands in overpaid taxes.

Just wanted to follow up on my earlier skepticism about taxr.ai. I decided to try it with my quarterly RSU vestings, and it actually worked incredibly well. It identified that my employer was withholding at 45% but my actual tax rate on those RSUs should be around 37% based on my tax bracket. The tool showed me exactly where on my W-2 the RSU income was reported and explained how the supplemental wage withholding works. I was able to properly account for all four vesting events from last year with their different share prices. Ended up getting about $5k more in my refund than I would have without understanding this properly. Definitely worth checking out if you're dealing with RSUs.

I had a similar situation with a large amount of RSUs and couldn't get through to the IRS to ask questions about proper reporting. Was on hold for HOURS. Finally used https://claimyr.com and their system got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how RSUs should be reported and confirmed that the 50% withholding is just a company policy, not an IRS requirement. They explained how to check my W-2 to see the actual amount withheld and how it would be reconciled when filing. Saved me a ton of time and stress dealing with this complicated issue.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was desperate to get answers about my RSU tax situation before filing deadline, so I tried it. The system called me back in about 25 minutes with an actual IRS agent on the line. The agent confirmed that my employer's 47% withholding on RSUs was much higher than necessary for my tax bracket, and explained exactly how to make sure I get that excess withholding back in my refund. They also clarified how to handle the capital gains on shares I sold after holding them for 6 months. Saved me from making some costly mistakes on my return and probably hours of frustration. Sometimes I hate being wrong, but in this case I'm glad I was.

Everyone's talking about the withholding part, but don't forget about tracking your cost basis correctly when you sell! I messed this up last year and ended up paying double tax on some of my RSUs. The vesting value becomes your cost basis, and if you don't track this correctly, you can end up paying tax on the same income twice. Make sure your brokerage is tracking the cost basis properly. Sometimes they don't get it right, especially if you've transferred between brokerages. I keep my own spreadsheet now with vesting dates, FMV at vesting, shares received, and shares sold for tax.

Has anyone used H&R Block for reporting RSUs? I'm wondering if they're equipped to handle this properly or if I should look elsewhere.

One thing nobody's mentioned yet - if you have RSUs that vest, you can actually choose to do an 83(b) election which changes how they're taxed. Basically you pay tax on the grant value up front rather than on the vesting value later. If you expect the shares to go up a lot, this can save you money.