How To Get Back Excess Taxes Paid On RSU's

RSU Stock is a tremendous benefit to receive from your employer. But without proper accounting, that benefit can take a major hit.....

RSU’s are taxed at two points: at exercise and upon sale.
 
At Exercise
RSU’s grant employees the right to exercise stock options once they vest. The exercise price is set at time of grant, usually at a discount from the fair market value (FMV), and sometimes at no cost. The employee then incurs taxable income on the discount amount at ordinary income tax rates.
 
So if an employee exercises 100 shares at a cost of $5/share, at a time when the FMV is $8/share, the employee would have taxable income of $300 (discount on stock = $800 FMV of 100 shares, minus $500 paid for shares).
 
Upon Sale
Then the RSU holder is taxed once again when the stock is sold, at capital gains tax rates. The tax is based on the sales price minus cost basis.
 
Where It Gets Tricky
Financial institutions will often report your cost basis as the price you paid, which is where you can get in trouble with double-taxation. That’s because the true cost basis is your exercise price, plus the discount you received.
 
So if your tax preparer simply enters info from 1099-B tax forms in mindless data-entry fashion, you’ll end up with an artificially low cost basis, resulting in you paying double taxes on the discount amount.
 
We Saved Two Clients Over $95,000!!
By amending a past tax return prepared by another CPA, we saved one client over $49,000! We saved a separate client over $46,000 by amending four years’ worth of tax returns he had prepared through self-prep software!
 
We Might Be Able To Do The Same For You!
Contact us if you, or somebody you know may have made this mistake with RSU’s, as we’d be happy to help amend those tax returns.