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What is the accounting for restricted stock releases in situations where the employee chooses witholding of vested securities to cover for taxes

Rondo Brakes's Profile

I am looking to get a basic understanding on the accounting treatment for restrticted stock vesting. The situation is shares have vested but the employee has chosen to have the company withhold shares to cover for taxes.

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Rondo,

For clarification, they're just getting the grant (and they're holding), so the vesting creates an income situation?

Ignoring 83b effects...

Treat it like you bought back the stock from the employee. They pay tax on the whole vest amount (differential between what they paid, if any), and you report that whole amount as income. Then they sell the stock back to you and it goes into treasury stock. For that they take no gain, so there is no tax impact (you may want to report it anyhow). That creates AP to the employee, which is used to offset their withholding liability.

Cheers

KP

Jack Judd
Title: Retired
Company: Retired
(Retired, Retired) |

I assume you work for a public company. Be aware that turning shares in to settle withholding needs to be clearly stated in the plan. It can viewed as a sale and depending on whether the employee may have restricted trading periods for his knowledge of insider information, could have ramifications for selling with knowledge of material non-public information.

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