How should we classify Performance Stock Unit awards in 'Stocks Mutual Funds, Bonds, Other' section if it's not an option to select? These are not RSUs, PSU is not there.

Forum|Forum|6 years ago
March 4, 2020
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ETrade is classifying these specifically as PSUs not RSUs but TT doesn't have a PSU option to select?

TurboTax Self Employed Online

TomYoung

Employee

PSUs are simply RSUs with a slightly different vesting trigger. Instead of the simple passage of time associated with RSUs - stay with the company until the vesting date - PSUs depend on staying with the company until some goal or event is achieved.

But there's no "income tax return reporting requirement" to use the guided RSU (PSU) interview when reporting the sale except in two instances:

The compensation associated with vesting wasn't included in your W-2 (extremely unlikely)
You have absolutely no clue as to the basis to use for the sale (and you should know that)

So simply use the regular "stock sale" interview and enter the 1099-B as it reads - wrong basis and all - and then correct the basis using the mechanism provided by TurboTax.

fredfred1234

I am confused by the taxation relating to RSU/PSU stock. My company listed my stock on my W2 so I pay income tax on it when I receive it. Then according to TT I have to pay capital gains tax on the whole amount sincE ethe cost basis is $0. So this would mean I am being taxed twice!

TT should ask for the adjusted cost basis not the cost basis surely.

DaveF1006

Yes. It does seem confusing. For reporting purposes, PSUs are RSUs with vesting based on the achievement of future performance conditions. The actual award of PSUs may range from zero to a multiple of the initial target award based on performance achieved.

Your PSU awarded to you is taxable income as ordinary income when these are delivered to you. This called a vest and this is reported on the W2 and taxed as ordinary income.

Also, these are subject to capital gains when you sell these. However, your cost basis in the shares will be their market value when they vest. When you report the sale of your stock, there will be a section there asking you what the cost basis is. Here is where you would enter the market value of the shares. It's not zero. You should receive a form from the employer informing you what your market share is but if one is not provided, you can check historical stock prices to see what the price per share amount was for that particular date or date range.

To address your concern about double-taxation, it may seem that you are double taxed but in reality, you are not. The initial award by which you are taxed is the same thing as purchasing those shares of stock. It's like purchasing these shares of stock on your own.

Now after owning the stock and when you decide to sell, then you are subject to capital gains tax. Think of it like buying and selling on the regular stock market. One of the advantage of PSU and RSU is that these may be provided to an employee at a discounted rate and the market value of the shares may be higher than you actually paid for them. I can see this principle applied to PSU based on performance targets.

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