I fought the IRS and won (partially) on RSU's [View all]

[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.