Tax Time: Making Sense Of Form W-2 When You Have Stock Compensation

By now you’ve probably received your Form W-2. Remember that it’s not just for reporting your salary to you and the IRS. Your W-2 includes income from any other compensation sources you may have, such as stock options, restricted stock, restricted stock units, employee stock purchase plans, and cash bonuses.If you have income and withholding from what the IRS considers supplemental wage income (such as stock compensation), making sense of what’s reported and why can be hard to decipher. You and your CPA or other tax-return preparer must understand where that income is reported on the W-2 to properly complete your Form 1040 tax return and avoid costly mistakes. Vesting of restricted stock, share delivery from restricted stock units (RSUs), and vesting of performance shares all trigger W-2 reporting of the income received. The treatment on the W-2 is essentially the same for all three grant types, assuming you did not elect to defer share delivery at vesting (only permitted in RSU plans at small number of companies).