Quick tax question on sell to cover shares

[Arcadia]

There is a big difference between the W2 wage and gross pay (take home + insurance premiums + 401k + SDI +...). We won't get the income tax form for vested shares until end February according to Morgan Stanley so I am impatiently curious whether all the sell to cover shares become taxable income even though we do not see a cent of it. No other shares were sold other than sell to cover. The difference is big enough to fund a year of college.

 

Also if my husband has like 100 shares of company share on hand accumulated over the years, that is not taxable until sold as capital gains right?

 

RSUs has always been my income tax filing pain in the neck. He is an employee, not self employed if that matters.

Edited January 27, 2017 by Arcadia in CA

[EKS]

I don't know if this is still the case but...

 

When you exercise (purchase) incentive stock options you are supposed to pay taxes on the difference between the purchase price and the price the stock was when the market closed the day of the purchase.  So, say you purchased the stock at $1 per share and the market value that day was $50 per share, you would owe taxes on the $49 "gain."  When you sell the stock, you use the money you paid in taxes as a credit against any capital gains you incur.

 

It could be that they stopped having people do that.  It was crazy to be paying taxes on money that didn't actually exist.

 

Also, incentive stock options are only one way to acquire stock as an employee.  So none of the above may apply to your situation.

 

I would suggest that if you're concerned, you consult a tax accountant.

Edited January 27, 2017 by EKS

[Arcadia]

I would suggest that if you're concerned, you consult a tax accountant.

Thanks. These are company given stocks, kind of like an annual bonus in stocks instead of cash. It is not the employee stock options which is a different kind of mess and we did not buy shares under ESPP. I know how to do the short term and long term capital gains form. I have to wait for the 1099 before seeing if we should just use a tax accountant. The difference is just big this year so I am curious and impatient.

[Annie G]

I don't know if this is still the case but...

 

When you exercise (purchase) incentive stock options you are supposed to pay taxes on the difference between the purchase price and the price the stock was when the market closed the day of the purchase.  So, say you purchased the stock at $1 per share and the market value that day was $50 per share, you would owe taxes on the $49 "gain."  When you sell the stock, you use the money you paid in taxes as a credit against any capital gains you incur.

 

It could be that they stopped having people do that.  It was crazy to be paying taxes on money that didn't actually exist.

 

Also, incentive stock options are only one way to acquire stock as an employee.  So none of the above may apply to your situation.

 

I would suggest that if you're concerned, you consult a tax accountant.

 

This is how ours worked when dh received stock grants instead of cash bonus. We paid tax that year then when we sold the stock we showed the previous tax paid as a credit against the gains.  Since we didn't actually purchase it, when it was granted to dh it listed the per share price and number of sales.