I fought the IRS and won (partially) on RSU's

[FHRRK]

First off, the IRS is the most painful organization I have ever dealt with and the first part of my career was in Supply Chain sometimes dealing with sole source suppliers.

Issue, the IRS has a huge issue with compensation via Restricted Stock Units. (RSU's)

The common process is to sell RSU's to cover taxes upon the date the RSU's are rewarded. This is an option picked when signing the docs for future RSU's. (Other option is to have the tax liability due on filing date.)

So I, like most people, picked option to sell the shares at date RSU's vest. For example I had 100 RSU's scheduled to vest 4/30/XX. On that date I would get 65 or 70 shares and 30 or 35 shares would be sold off and the IRS given the monies from the sold shares.

Plan administrators (like E*trade or Fidelity) provide year end tax docs that show the full 100 shares granted making it appear like the person received 100 shares. Then the IRS comes after you for additional taxes due thus effectively taxing a person 60 to 70+ percent.

I got nailed for three separate years, and fought for over four years to clear off the two oldest years. When filing via quicken or using a tax service that uses similar software, the download from the Plan Administrator ONLY includes the document with total shares originally granted. They have an Addendum that corrects the shares received, but that document must be manually downloaded and attached so you are not double taxed.

After four years of fighting I was able to win the 2017 battle, at this point I am letting 2016 double tax go, and was able to correct my CPA's error before filing my 2021 taxes.

So if you are someone you know gets some compensation through RSU's, put a note in your tax file, download the RSU grant docs for the years AND the Addendum if you turned over shares to pay for taxes. Otherwise the IRS will make it extremely difficult to correct the error. (Seems really simple and logical to me that the IRS would make plan holders include the Addendum as part of the main document so tax payers aren't bent over.)

Note: Any CPA's here, please correct any errors in my interpretation. I want to make sure others don't have to go through 100's of hours trying to get the IRS to correct filings.

[Voltaire2]

1. I was happy to pay a tax professional to do this.

I also had a consulting business at the same time, so tax prep was a business expense. She demanded both docs from fidelity, as I was clueless. Good thing. Money well spent.

Also fidelity doesn’t exactly make it easy to find or understand the withholding doc.

[FHRRK]

2. It isn't just Fidelity

It is all of them, all following IRS guidelines!

I made the mistake the first two years filing via quicken. A person downloads the docs as they step through the program, but guess what the Addendum doesn't get downloaded as a required doc. I then had a CPA make the error, but based on experience was quickly able to direct her that the Addendum wasn't included in my filing!

This has been going on since at least 2016 yet the IRS hasn't fixed it, almost like they don't want it fixed.

General comment, many working for tech companies get 10 to 15 percent of income via RSU's, then the IRS tries to take 70% of that figure.

The executives making millions, not many likely end up filing with the error. Some programmer or consultant making 100k, often time takes a 10k tax hit. They get a letter two or three years later, payment demanded within 30 days, can't get through to IRS, end up paying! Then if you do fight it you have two years to get it corrected. Can't get a response from the IRS tough shit, two years the Statute of Limitations runs our and the IRS says too bad.

Finally, on that 10k they will charge you about $1,500 interest when you get the notification. So I paid the interest due while fighting, (interest accrued over 2 years) four years later I got it reversed, interest IRS will pay me - $0.00.