A restricted stock unit, or RSU, is a form of nonqualified deferred compensation, a promise to pay an employee in stock sometime in the future. RSUs are issued to employees through a vesting plan and distribution schedule. An RSU has no tangible value until vesting is complete. After RSUs are done vesting, they are given a fair market value and are considered income. Some of the shares are withheld for income tax purposes while the rest are given to the employee who can then sell them.
If the taxpayer received RSUs, the income will be reported on their W-2 in Box 1, and will also be included for information purposes in Box 14. They should have also received Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), providing details about the stock.
If the taxpayer didn't sell the stock they received, there is nothing further to report beyond entering their Form W-2 into their tax return. If the taxpayer sold the some or all of the stock, they will have received a Form 1099-B for the sale. This sale will be reported as usual on Form 8949, and the cost basis of the stock sold will be equal to the fair market value shown on the taxpayer's W-2 in Box 14 plus cash they paid, if any. For the sale to be considered long-term, the taxpayer must have held the stock for at least one year from the exercise date and two years from the grant date. (Both of these dates are shown on Form 3921.)
When the taxpayer/employee exercises a stock option, no income is recognized but the taxpayer will have to include in AMT income the excess of the stock's fair market value over its exercise price. These two amounts are shown on Form 3921.
Additional Information:
IRS Publication 5992, Equity (Stock)-Based Compensation Audit Technique Guide