How to report the ordinary income part of option sales when no W-2 is received?

[JohnCPACFP]

My client sold several RSU and ESPP options in 2021.  She did not work for the company in 2021 and did not receive a W-2.  How do I enter the ordinary income part of these transactions on line 7 in Lacerte?  

[jschlip]

I use Schedule 1 line 8j for ordinary income on vesting of stock options. Then you would show the sale on Schedule D with the basis reflected.

[qbteachmt · Accepted solution]

The sale in 2021 doesn't not make it the W2 event. The vesting is the date of valuation. The date of the vesting and the sale don't have to be the same. Do you know when this was vested?

I like, for instance:

https://www.investopedia.com/terms/r/restricted-stock-unit.asp

https://www.investopedia.com/articles/tax/09/restricted-stock-tax.asp

Special Considerations

RSUs are treated differently than other forms of stock options when it comes to how they are taxed. Unlike these other plans, the entire value of an employee's vested stock is counted as ordinary income in the same year of vesting.

In order to declare the amount, an employee must subtract the original purchase of the stock or its exercise price from the FMV on the date it becomes fully vested. This difference is then declared as ordinary income by the taxpayer. If the stock is sold at a later date (and not on the exercise date), the difference between the sale price and FMV is declared as either a capital gain or loss on the date of vesting.

[JohnCPACFP]

Thank you. First time client that is currently overseas, so data gathering takes some time. RSUs sold in 2021 had vested in 2018 and 2019. I checked that the ordinary income was included in her W-2s for those years, and they were.

[JohnCPACFP]

Thank you.

[qbteachmt]

"RSUs sold in 2021 had vested in 2018 and 2019. I checked that the ordinary income was included in her W-2s for those years, and they were."

Yay. Glad to help.

[Strongsilence-CPA]

@qbteachmt 

 - if you are around lurking -

My client's RSU vested on 12/31/2021. It appears to me that the compensation is taxable in 2022.  The taxable compensation on the 2022 paystub agrees exactly to Shares vested on 12/31/2021 X Closing Stock Price on 12/31/2021.  Does this one-year deferral sound right?

I have the grant notices, but they don't answer my question.

[qbteachmt]

"Does this one-year deferral sound right?"

I don't see that there is a one year deferral.

"The taxable compensation on the 2022 paystub"

Payroll has three dates:

Date(s) Worked

Pay Period

Pay Date

This benefit has no bearing on Date Worked. There is the event of the vesting, which is part of a pay period, and, for example, a Salary person who gets paid for the pay period of 1st-15th, paycheck date is about 3 days later; and then 16th-end of month, paycheck date is about 3 days later...would make this a 2022 paycheck entry. As long as you have that info, you have what you need. It will be part of the 2022 W2, then, because the paycheck date is 2022.

[Strongsilence-CPA]

Understood. Thank you.