Document RSUs, expect scrutiny
Tax experts and recent analyses warn tech employees to keep meticulous records of every RSU grant, vest, exercise and sale — cross‑border equity and new IRS/CRA forms increase audit risk, and a breakdown of heavy RSU payouts in public filings underscores how equity can drive large, reportable income spikes ( ).
The IRS’s Equity (Stock)-Based Compensation Audit Technique Guide explicitly lists restricted stock units (RSUs) and directs examiners to confirm whether RSU income was reported on recipients’ W‑2s and related forms, flagging RSU reporting as an audit focus. (irs.gov) Brokerage Form 1099‑B outputs commonly show a $0 or missing cost basis for RSU sales, requiring taxpayers to correct basis on Form 8949 to avoid apparent double taxation; the IRS Form 8949 instructions explain the required adjustments. (workplaceservices.fidelity.com) (irs.gov) The IRS has rolled out targeted 1099 reporting changes for tax‑year 2025 that add new boxes and transfer codes for brokers and payors, increasing automated cross‑checks that can trigger mismatch examinations when W‑2, 1099 and broker records diverge. (irs.gov) (blog.taxbandits.com) The Canada Revenue Agency adopted an OECD‑inspired “hybrid methodology” for sourcing cross‑border RSU benefits after 2020, a technical change that tax advisers say has increased disputes over which country taxes vesting income. (assets.kpmg.com) (taxinterpretations.com) U.S. Chief Counsel Advice CCA 202327014 and related IRS guidance require employers to consider U.S. withholding and payroll tax obligations when employees transfer to foreign subsidiaries before RSU vesting, adding employer withholding complexity and potential withholding mismatch audits. (grantthornton.com) (wagnerlawgroup.com) Public SEC filings show RSU vesting can create multi‑million dollar taxable events in a single year: PROS Holdings reported the total fair value of time‑based RSUs vested as $36.7 million in 2024, $27.0 million in 2023 and $24.6 million in 2022. (sec.gov 1) (sec.gov 2) Plan administrators and broker supplemental statements routinely list the adjusted cost basis and vesting FMV that taxpayers must retain; multiple plan administrators and tax advisers recommend keeping grant agreements, vesting schedules, employer supplemental tax statements and broker 1099/ supplemental worksheets as documentary evidence for any IRS or CRA inquiry. (workplaceservices.fidelity.com) (vestingstrategy.com)
