Understanding Tax Implications of RSU Settlement - How to Track Taxes Paid

The taxes withheld when your RSUs vest should definitely be showing up on your W-2, not a 1099. When RSUs vest, they're considered compensation income (just like your regular salary) and your employer should be withholding taxes at that point. When you look at your W-2, check boxes 1, 3, and 5 (for federal, Social Security, and Medicare wages) - these should include the value of your vested RSUs. Then look at boxes 2, 4, and 6, which show the corresponding withholding. The withholding amounts should include the taxes Morgan Stanley retained when your RSUs vested. The 1099 from Morgan Stanley is typically just reporting the sale transaction to the IRS, not the withholding. That's why you won't see the tax withholding there - it's already been handled as payroll withholding on your W-2.

I dealt with this exact RSU tax confusion last year and finally figured it out after hours of frustration! I discovered taxr.ai (https://taxr.ai) which helped me track down exactly where my RSU withholding was reported. They have a document analyzer that identifies exactly where on your W-2 the RSU income and withholding appears - it was in Box 14 with a special code my company uses for "RSU withholding" that I completely missed! The tool also explained how the withholding from Morgan Stanley flows through to my employer's payroll system and ultimately to my W-2. Apparently this is a super common issue with RSUs that confuses everyone. The analyzer even showed me how to reconcile the Morgan Stanley statements with my W-2 to prove everything matched up correctly.

Just wanted to follow up about taxr.ai - I tried it with my E*TRADE RSU situation and it was actually really helpful! Turns out my company was reporting the RSU withholding in Box 14 of my W-2 with the code "ESTR" which I never would have figured out. The analyzer showed me exactly how to reconcile my brokerage statements with my W-2, and even identified that my company was slightly under-withholding on my RSUs (by about 2.8%) compared to my regular income. This explained why I kept owing a bit at tax time every year. I've adjusted my withholding on my regular paycheck to compensate. Definitely worth checking out if you're dealing with RSU tax confusion!

I struggled with this RSU tax withholding mess for years until I finally got through to someone at the IRS who could explain it properly. I wasted SO MUCH TIME on hold trying to get answers. If you're dealing with this and need to speak with the IRS, I'd recommend using Claimyr (https://claimyr.com) - they got me connected to an actual IRS agent in about 20 minutes instead of the usual endless hold times. There's a demo of how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that RSU withholding should appear on your W-2, not your 1099 from the brokerage. They explained exactly which boxes to check and what codes to look for. Having an actual conversation with someone who could walk me through my specific documents made all the difference.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it since I've been trying to reach the IRS about my RSU reporting issues for weeks. Not only did it work, but I got connected to an agent in about 35 minutes when I'd previously waited 2+ hours and still got disconnected. The IRS agent explained that my RSU withholding should be included in Box 2 of my W-2 along with my regular income tax withholding. The specific breakdown of RSU withholding vs. regular paycheck withholding might be listed in Box 14 with a special code, but it all gets lumped together in Box 2 for federal tax withholding. This finally explained why I couldn't "find" my RSU withholding - it was there all along, just combined with my regular withholding!

Something else to check - look at your paystub from around the time your RSUs vested. Many companies will show the RSU vesting as a line item on your paystub for that pay period, along with the associated tax withholding. This can help you reconcile everything. Also make sure to check if Morgan Stanley provides a "Supplemental Tax Reporting Statement" - sometimes the withholding information is on that document rather than the regular 1099-B they send.

One thing nobody's mentioned - make sure you're tracking your cost basis correctly for when you sell! Since RSUs are already taxed as income when they vest, your cost basis for capital gains purposes is the fair market value on the vesting date. If you sell immediately, you'll have minimal capital gains/losses, but if you hold them for a while after vesting, you need to use that vesting date value as your basis.

This thread has been incredibly helpful! I've been dealing with a similar RSU confusion for months. Just to add one more perspective - if you're still having trouble reconciling everything, consider requesting a detailed breakdown from your company's stock plan administrator (not just the brokerage). My HR department was able to provide me with a report showing exactly how much RSU income was added to each paycheck throughout the year, along with the corresponding withholding amounts. This made it much easier to match up with my W-2 and verify that everything was reported correctly. Also, for anyone using tax software like TurboTax or FreeTaxUSA, make sure you're entering RSU sales correctly - the software often tries to treat them like regular stock purchases where you paid cash, but since RSUs were "free" to you, your cost basis is the vesting date fair market value (which was already taxed as income). Getting this wrong can definitely lead to double taxation!

Great discussion everyone! I wanted to add something that might help others avoid the confusion I experienced. When you receive RSUs, think of it as two completely separate tax events: 1) **Vesting Event**: When RSUs vest, it's treated as regular compensation income (like getting a bonus). Your employer reports this on your W-2 and withholds taxes just like they do from your regular paycheck. This is where those "missing" taxes are - they're combined with all your other payroll withholding in Box 2 of your W-2. 2) **Sale Event**: When you sell the vested shares, it's a separate capital gains transaction reported on Form 1099-B from your brokerage. Since you're selling immediately after vesting, there's usually little to no capital gain/loss. The key insight that finally clicked for me: the tax withholding happens during the vesting event (handled by your employer's payroll), not during the sale event (handled by the brokerage). That's why you won't see the withholding on any documents from Morgan Stanley - they're just executing the sale transactions. If you're still confused, definitely check your paystubs from vesting periods and look for any supplemental tax documents your employer might provide specifically for equity compensation.