Sage-Tips

How are RSUs taxed pre IPO?

For pre-IPOs, the RSUs will vest but it’s not considered income until the company goes public. So if you’re vesting shares over the years, there are no taxes at each vesting but once the company goes IPO you get a waterfall of stocks that you’ll pay all the taxes on all at once.

How does RSU in pre IPO company work?

Expect RSUs In A Later-Stage Private Company As the private company matures and moves toward an IPO or acquisition, equity grants tend to shift toward restricted stock units (RSUs). You don’t exercise RSUs, unlike stock options. Once the RSU vesting conditions have been met, the shares are delivered to you.

What is the basis of restricted stock units?

An RSU is a grant whose worth is based on the value of the company’s stock. There is no value to the employee when issued. The RSUs will vest at some point in the future based on time passed or perhaps the achievement of a goal.

Does RSU have cost basis?

In fact, the cost basis and RSU rules are incredibly straightforward: it’s the price the shares cost for normal market buyers the day they vested into your name. That’s it. Before you file, double-check that the income from your vested RSUs reported on your W2 matches the cost basis on your Form 1099-B.

Do I use cost basis or adjusted cost basis?

Sometimes it’s called “cost basis” or “adjusted basis” or “tax basis.” Whatever it’s called, it’s important to calculating the amount of gain or loss when you sell an asset. Your basis is essentially your investment in an asset—the amount you will use to determine your profit or loss when you sell it.

What happens to RSU during IPO?

A liquidity event: This means the company goes public, either through a traditional IPO or a direct listing. Once both conditions have been met, any vested RSUs you own will turn into actual shares.

Is there a cost basis for restricted stock?

How do you value a restricted stock unit?

RSUs are assigned a fair market value at the time they become vested. In other words, if the company’s stock is valued at $20 per share at the time the RSU becomes vested, then the per-unit value of the RSUs is $20.