Best Way to handle RSUs and taxes

ddo71

Hi, I've poked around the board looking for an answer, and I've probably confused myself more. Company I work for grants RSUs that vest quarterly. On vest day, I realize income based on price. Company withholds taxes, rounds down, and shares appear in my Schwab account. Then some extra cash shows up in my paycheck for the round down amount. The shares show up fine, but I'm trying figure out the best way to do this to track taxes since they under withhold.

Right now, I have it set up as recurring income. Obviously I have to go in and tinker with the amounts based on the share price at the time. I tried having it in my checking account, and then transfer the money into the brokerage, but the shares are already there, so if I use the funds to buy stock, it's wrong. I tried having the income appear in my brokerage account, but then I have to do a cash transfer out to the vapor to make it match. Not real elegant.

I tried looking into the varies ESPP type transactions, but it isn't really an ESPP, so it seemed clunky, and based on the board, no one seems to like using it for RSUs.

Any ideas/best practices?

Jim_Harman

Are the shares appearing in your brokerage account as Added? If so you can transfer the cash for the purchase to the brokerage acct and edit the Added transactions to Boughts, using the cash amount.

ddo71

Thanks. It looks like to make that work I have to create a dummy account to transfer from (or use my checking account, which I would rather not do), otherwise the brokerage account still doesn't tie. But, since this is largely a manual process anyway, it's not that big of a hassle.

Tom Young

"I'm trying figure out the best way to do this to track taxes since they under withhold."

Although many companies sell a certain number of shares automatically when the stock vests, many companies allow you to adjust the number of shares sold and allow for other ways of covering the taxes, like paying out of pocket (and maybe receiving the entire shares in the grant).  You might want to inquire about this.

I've advised in the past that RSUs can be accounted for in Quicken by creating the grant as a NonQualified Stock Option (NQSO) with an exercise price of $.000001.  Then as shares vest you "exercise" your option, (usually with no cash effect because of the small per share exercise price), and Quicken creates the appropriate amount of income (_EmpStkOptInc). 

I'd do this in a separate Account in Quicken with the GROSS number of shares settling into that same Account.  You could then sell the appropriate number of shares "for taxes" followed by a series of MiscExp actions to scatter that cash around the various tax Categories.  Finally transfer the shares over to the brokerage Account.

There's a couple of wrinkles here.  First, the Quicken options wizard creates the entries for "vesting" using a round number of shares, but you can go into those transactions and change the round number to the actual number of shares that includes the fraction.  Second, since your sale of the fractional share shows up on your paycheck I'd guess that there's some effect on taxes withheld and that fraction of a share is sitting over in your brokerage Account waiting to be sold, and I'm not sure how to square that circle.  You may have to resort to selling the fraction over in the brokerage Account (at no gain or loss) and then "magically" have that cash disappear through a self-referencing transaction.

ddo71

Re the withholding, I actually asked about that, in reverse. But, we don't let people do that. I have some supplemental income through some passive LLCs, so I try to track the taxes in Quicken and make up the shortfall from the under withhold through quarterly estimates.

I thought about the NQSO option. I might try that in the future. But, I'll try the dummy account/transfer approach Jim mentioned first. My vest schedule is little uneven due to rounding, multiple grants, etc.

Tom Young

I'll point out that the options wizard does allow you to number your grants, which might help eliminate some confusion, or you could even resort to creating a separate Account for each grant to keep things very distinct.  Since the vesting is quarterly you probably could do the latter with just a small number of Accounts, recycling and renaming them as needed.

J. Holmes

Hey, all.  I have a similar inquiry.  it looks like the recommendations above are for Quicken Windows, any recommendations for Quicken Mac?

Jim_Harman

@J. Holmes
You may get ideas from the posts above, but if you want Mac-specific advice, you should post in the Mac section of the forum.