In most scenarios when your RSUs vest you can sell them immediately and there is almost no tax impact. However, if the stock reverts to the original IPO/Vesting date price, don’t hesitate to sell since there will be no additional tax benefit.

How do I report income from restricted stock?

When you receive an RSU, you don’t have any immediate tax liability. You only have to pay taxes when your RSU vests and you receive an actual payout of stock shares. At that point, you have to report income based on the fair market value of the stock.

Should I sell RSUs as soon as they vest?

Given that RSUs are taxed as ordinary income and there is no tax benefit for holding them, I recommend you sell as soon as you vest and use the proceeds to fund your other financial goals.

When do restricted stock awards become taxable to employees?

While compensatory stock options have fallen out of favor, use of restricted stock awards has increased. The stock is not taxable to the employee until either it is no longer subject to a substantial risk of forfeiture by the employee or is transferrable by the employee.

Can a company sell restricted stock to an employee?

Restricted stock cannot be sold by the grantee until the shares are vested. In nearly all cases, the company has the right to repurchase all unvested shares if the employee leaves the company prior to becoming vested. A person with a vested interest in restricted stock is considered a company shareholder.

When do I have to pay tax on restricted stock units?

If you have restricted stock units, the taxation is similar, except you cannot make an 83 (b) election (discussed below) to be taxed at grant. With RSUs you are taxed when the shares are delivered to you, which is almost always at vesting (some plans offer deferral of share delivery). For details, see the section on RSUs.

Why are restricted stock units important to employees?

Employee compensation is a major expenditure for most corporations; therefore, many firms find it easier to pay at least a portion of it in the form of stock. This type of compensation has two advantages: It reduces the amount of cash that employers must dole out, and also serves as an incentive for employee productivity.