RSU tax question

[nickyh]

So in 2014 I had some RSU's vest that I have in my company, and as a result i am unsure how to treat the following transaction. Hopefully my screen capture is large enough.

Section 1, shows a transfer into my margin account of $1,661.27 some interest of $25.99 and then a sale of $1,671.23 -> now I never received the cash value of this, it all occurred in the margin account.

What / how am i supposed to report this? Does this go on a Schedule 3? I feel like I should not ignore the Sell.

I should add: the $1661.27 is the withholding tax that is included in my T4 for 2014, total income tax paid amount.

Section 2 shows the $25.99 as paid by me and then the dividend income paid to me totaling $23.24, that appears in section 3 on my T5 so I understand section 2 & 3 and how to report but not section 1.

I included all 3 so I can show the transaction from start to finish.

[Feruk]

Is the amount that vested not simply included on your T4? My experience with PSUs (I assume something similar) from my work is they were just treated as income and included in my T4 from my company. I then got a T5 for the dividend income separately.

[nickyh]

mmmm, i think you may be right about that. This is my first year dealing with RSU's so our HR team has not communicated much.
I'll look into that. Thx.

[ExtraSlow]

I'm not a tax expert, but as far as I know, they become income at the time that they are available to sell, and AT THAT VALUE. My company always sold a portion and pre-paid my tax bill on the vest date, which really pissed some folks off, but it prevents the situation where the tax is being paid on a value which may have greatly decreased since that day.
My company always had it show up on the T4, I think that's how it'll be for you.

[DJ_NAV]

I am a tax expert myself (CA) and you can PM if you require in detail help. With the limited information provided, I could assume that the following may apply:

- They took out the tax withheld amount from your margin account and sold shares to cover the margin balance (86 shares). This does not seem to be the common practice but I have seen it before.
- The amount of dollars that you benefited (amount out of pocket for employer) is fully taxable and should be part of your T4. They would have also done the deductions as applicable. It is as if the employer paid a cash bonus to the employee.

The above is just some comments I can provide upon a quick read of your post. Actual situation may be different.

[nickyh]

Thanks DJ_Nav, the sale part was what had me confused as I certainly did not see any extra cash sent my way. 86 shares seemed so random.

It makes sense now that it should be part of my T4 as my readings tell me that RSU's are taxable when vested instead of when sold like an option.

Thanks to all who also replied.

[ThePenIsMightier]

Bump.
So, if my friend has $100k of these things vesting next year, that's going to bloat his income really high and he'll owe a pile of tax. It's likely his employer will sell some of the shares to withhold the tax owed so he doesn't have to start saving now. Fine.
Then I assume he'll owe the capital gains for everything they sold which iIRC is half of the gain value. As an easy math example if they went from $50k initially to $100k upon vesting/issuance, he would owe tax on $25k. What's the tax rate on that again? Is it income rate or something simple like 10% ?
The bigger question is what happens if these shares are somewhat illiquid? This would be the case in a small privately held company. They're not easy to sell and if he found someone to buy them, it would likely be at a discount from the "market price" which really isn't a market price. It a value assessed by the board.
Aren't people getting taxed to death on something they can't easily sell for the value the company has claimed/assigned the shares to have?
As long as people don't have to go out of pocket to deal with these taxes, I guess it's not really a burden but it seems less fair when shares are illiquid compared to a publically traded company.
Is there anything in the tax laws that recognize this difference and treat it differently?
Also, who is the company selling the shares to in order to withhold his tax? They didn't have the money to pay him more over the last few years but now they still need to cough up a bunch of money to withhold his (and everyone else who got RSU's) taxes. What if they're so small that this is a big burden for them?

[nzwasp]

My wife got paid $10K in RSU's last year from her company but it never was deposited into her bank account (it did appear on her T4 though and is on her payslip as income) im presuming its sitting in her solium account because it asks you to sign some terms and conditions every year to ensure you keep benefiting from it. This year she got a letter saying she would be getting an estimated 30K in RSU's (estimated payout) but she never believes it because it never appears in her bank account she just presumes the company is doing so shit that the benefit never gets paid.

/I really dont understand it when people dont understand their own compensation.

[phreezee]

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My wife got paid $10K in RSU's last year from her company but it never was deposited into her bank account (it did appear on her T4 though and is on her payslip as income) im presuming its sitting in her solium account because it asks you to sign some terms and conditions every year to ensure you keep benefiting from it. This year she got a letter saying she would be getting an estimated 30K in RSU's (estimated payout) but she never believes it because it never appears in her bank account she just presumes the company is doing so shit that the benefit never gets paid.

/I really dont understand it when people dont understand their own compensation.

Generally RSUs are vested in thirds over 3 years. Since it was just last year, she might expect $3333 worth of that 10k grant to vest this year.
Next year she will likely have $3333 + $10000 ( 1/3 $30k grant) vest.
The default setting when vesting for Solium is sell to cover, where you sell enough shares to cover the taxes and the remaining shares are left in Solium.
The company usually emails you when you can elect what to do with your vested shares. That is when she can elect to sell and receive cash minus tax.
She would have had to them give instruction to sell the shares and provide the bank account information for it to land in your bank account.