are stock awards included in w2: quick guide

Are stock awards included in Form W‑2?

Are stock awards included in w2 is a common question for employees who receive equity compensation. This article explains, in plain English, which types of awards create W‑2 reportable compensation, when the income is reported, how FICA and basis work, common mistakes, and a practical checklist for tax filing. You will learn how restricted stock, RSUs, nonqualified stock options, ISOs, ESPPs, and PSUs are treated for Form W‑2 reporting and what documents to collect before you file.

As of June 1, 2024, according to IRS guidance and standard Form W‑2 instructions, employers must report taxable compensation from equity awards on the employee’s Form W‑2 in the year the income is includible in wages.

Note: This is general information for U.S. tax reporting and not personalized tax advice. Consult a qualified tax advisor for situations that are complex or cross‑border.

Quick answer / summary

• Most equity awards that create ordinary compensation are included on the employee’s Form W‑2 in the year they are taxed. In short: are stock awards included in w2? Yes—when the award produces taxable ordinary income, that income is generally reported on Form W‑2 in the year of taxation.
• Examples reported on the W‑2: restricted stock taxed at vesting, RSUs when settled, the bargain element of nonqualified stock options (NQSOs/NSOs) at exercise, and compensation from ESPP disqualifying dispositions.
• Exceptions and different timing: Incentive Stock Options (ISOs) normally do not produce ordinary income on the W‑2 at exercise (but may trigger AMT), and qualifying ESPP sales usually do not create W‑2 ordinary compensation.
• Employers also withhold federal and state income tax and FICA where required, and must include amounts in Box 1 (wages) and applicable FICA boxes.

This summary answers the core question are stock awards included in w2 and sets the stage for detailed treatment by award type, timing, reporting boxes, and sample numeric examples.

Types of stock awards and how they differ

Tax and reporting treatment depends on the award type and the taxable event (grant, vest, exercise, sale). Below are common award types and the general way each is treated for Form W‑2 reporting.

• Restricted Stock Awards (RSAs)
• Restricted Stock Units (RSUs)
• Nonqualified Stock Options (NQSOs / NSOs)
• Incentive Stock Options (ISOs)
• Employee Stock Purchase Plans (ESPPs)
• Performance Stock Units (PSUs)

Each section below explains whether and when are stock awards included in w2 for that award type, and why.

Restricted Stock Awards (RSAs)

Restricted stock awards (sometimes called restricted stock grants) are actual shares issued to an employee subject to vesting and forfeiture conditions. Key points:

• Taxable event: Unless an employee timely files an 83(b) election, restricted stock is taxable when it becomes substantially vested (when the risk of forfeiture lapses).
• W‑2 reporting: The ordinary income equal to the fair market value (FMV) of the shares at vesting, reduced by any amount paid for the shares, is included in Box 1 of Form W‑2 in the year of vesting.
• Withholding and FICA: Employers generally withhold income and payroll taxes on that income and include it in FICA wages unless special rules apply.
• 83(b) election effect: If an employee files an 83(b) election within 30 days of grant, the FMV at the grant date is included as ordinary income on that year’s W‑2 instead of at vesting (see the Section 83(b) section below).

Short answer for RSAs: are stock awards included in w2? Yes, RSAs are included on the W‑2 when ordinary income arises—either at grant (with 83(b)) or at vesting (without 83(b)).

Restricted Stock Units (RSUs)

RSUs are a contractual right to receive shares (or cash) in the future, subject to vesting conditions. They are among the most common equity awards.

• Taxable event: RSUs are generally taxable when shares are delivered (or cash paid) on settlement after vesting.
• W‑2 reporting: The FMV of shares delivered at settlement is ordinary income and is reported on Form W‑2 in the year of settlement. Employers typically withhold taxes at settlement and include wages in Box 1.
• FICA and timing: FICA is usually due at settlement; in some deferred settlement plans, special timing rules apply for payroll tax purposes.

For RSUs, the answer to are stock awards included in w2 is typically yes—the settlement value is reported as wages on Form W‑2 in the year of settlement.

Nonqualified Stock Options (NQSOs / NSOs)

Nonqualified stock options permit employees to purchase shares at a specified exercise price. Treatment:

• Taxable event: The bargain element—FMV at exercise minus exercise price—is ordinary income when exercised.
• W‑2 reporting: Employers must include the bargain element in Box 1 for employees who receive W‑2 wages. The amount is subject to income tax withholding and payroll taxes.
• Subsequent sale: When the employee later sells shares, capital gain or loss is computed relative to the basis (exercise price + amount reported as ordinary income).

So for NQSOs, are stock awards included in w2? Yes—the taxable income at exercise normally appears on the employee’s W‑2 in the exercise year.

Incentive Stock Options (ISOs)

ISOs are preferentially taxed if holding requirements are met. Important distinctions:

• W‑2 and ordinary income: ISO exercise generally does not create ordinary income for regular tax purposes and therefore is not reported as wages on Form W‑2 at exercise.
• AMT: Exercise of ISOs may generate an alternative minimum tax (AMT) adjustment—the “spread” may be included in AMT income in the year of exercise, which is handled on Form 6251 rather than Form W‑2.
• Disqualifying disposition: If the employee sells the ISO shares before meeting the required holding periods (a disqualifying disposition), some or all of the spread becomes ordinary income and may be reported on Form W‑2 in the year of sale.

Answer for ISOs: are stock awards included in w2? Not at exercise for regular tax treatment, except when a disqualifying disposition requires employer reporting in the year of sale.

Employee Stock Purchase Plans (ESPPs)

ESPPs let employees buy shares at a discount through payroll deductions. Treatment depends on whether the sale is qualifying.

• Qualifying disposition: If holding periods are met, ordinary income is limited or absent; compensation reported on Form W‑2 is typically not required for the discount at purchase.
• Disqualifying disposition: If the sale is a disqualifying disposition, the employer reports the ordinary compensation portion (often the discount or spread as defined under the rules) on Form W‑2 in the year of sale.
• Employer reporting: Employers may use Form W‑2 to report compensation related to disqualifying dispositions and may issue Form 3922 for ESPP stock transfers to employees.

So are stock awards included in w2 for ESPPs? It depends: disqualifying dispositions usually create W‑2 compensation; qualifying dispositions normally do not.

Performance Stock Units (PSUs)

PSUs are like RSUs but vesting depends on performance metrics.

• Taxable event: PSUs are taxable when vested and settled, based on FMV at settlement.
• W‑2 reporting: Ordinary income at settlement is reported on Form W‑2 in the settlement year.

PSUs follow the same practical rule for W‑2 reporting as RSUs: taxable settlement value is included on the W‑2.

Taxable events and timing (grant, vest, exercise, sale)

Understanding when a taxable event occurs is central to answering are stock awards included in w2 for each award:

• Grant: In most cases, the grant itself creates no immediate ordinary income. Exceptions include 83(b) elections for restricted stock, and some nonstandard plans.
• Vesting / Settlement: For restricted stock without 83(b), RSUs, and PSUs, ordinary income occurs at vest/settlement when shares or cash are delivered. That income is W‑2 reportable.
• Exercise: For NQSOs, the bargain element at exercise is ordinary income and is included on the W‑2. For ISOs, exercise alone normally does not create W‑2 ordinary income (but may create AMT exposure).
• Sale: The sale of shares after ordinary income has been reported results in capital gain or loss measured from the basis (which includes the amount previously treated as ordinary income). A disqualifying disposition for ISOs or ESPPs can generate W‑2 reportable compensation at sale.

By mapping events to tax consequences you can determine whether are stock awards included in w2 for a particular transaction.

What appears on Form W‑2 and where

When ordinary compensation arises from equity awards, employers typically include amounts on Form W‑2 as follows:

• Box 1 (Wages, tips, other compensation): The ordinary income component from vested awards, NQSO exercises, disqualifying ESPP/ISO dispositions, or 83(b) inclusion is included in Box 1 wages.
• Boxes 3 and 5 (Social Security and Medicare wages): Compensation subject to FICA is included in these boxes as applicable. Some equity events are FICA taxable; see the FICA section for timing rules.
• Box 2 (Federal income tax withheld): Shows federal tax withheld on the reportable wages.
• Box 12 / Box 14: Employers sometimes show supplemental details (e.g., elective deferrals, amounts withheld for share withholding) in Box 12 or Box 14. Box 14 entries are informational—do not double count them when preparing returns.

Employers must avoid double‑counting. The FMV included in Box 1 at vesting or exercise becomes the employee’s cost basis for calculating later capital gain or loss.

FICA (Social Security/Medicare) and the special timing rule

Payroll taxes (FICA) are treated differently from income tax in some equity contexts. Key points:

• General rule: Equity compensation that is ordinary income is generally subject to Social Security and Medicare taxes (unless a statutory exemption applies).
• Special timing rule (IRC §3121(v)): For deferred delivery arrangements (for example, if shares are subject to restrictions beyond substantial vesting or are delivered after a long deferral), payroll tax timing may follow IRC §3121(v). Under that rule, employers may be required to include amounts in FICA wages when the employee performs the services or when the risk of forfeiture lapses—depending on plan terms and IRS guidance.
• RSUs and FICA: Most RSU settlements are subject to FICA at settlement. But for some plans with deliberate deferral provisions, the special timing rule can require earlier FICA inclusion.

Because FICA timing can differ from income tax timing, confirm how your employer treats payroll taxes for your awards. Are stock awards included in w2 for FICA purpose? If the award produced ordinary income and is treated as FICA wages, those amounts appear in Boxes 3 and 5 as appropriate.

Cost basis, Form 1099‑B, and avoiding double taxation

A common taxpayer problem is apparent “double taxation” where ordinary income is reported on the W‑2 at vesting/exercise and broker 1099‑B shows the full sale proceeds without reflecting basis increased by that income.

• Basis at sale: The FMV included in Box 1 at vesting or the NQSO bargain element reported on the W‑2 generally becomes the cost basis in the shares for subsequent sale.
• Broker 1099‑B issues: Brokers sometimes report cost basis incorrectly (e.g., zero or acquisition price only) for shares acquired through equity compensation. That can make it look like the full sale amount is capital gains, double‑counting the ordinary income already reported on Form W‑2.
• Fixing the return: To avoid double taxation, taxpayers must adjust the basis on Form 8949 and Schedule D to reflect the W‑2‑reported income as part of basis. Keep supplemental equity tax statements that show the FMV at vest or the NQSO bargain element.

Practical step: reconcile the amount reported on Form W‑2 with the basis reported by the broker and, if needed, correct Form 8949 entries so only the actual capital gain/loss is taxed.

Employer reporting responsibilities and other information returns

Employers have specific obligations when they provide equity compensation:

• Form W‑2: Include taxable compensation from equity awards in Box 1 and report withheld taxes in Box 2, and report FICA wages as applicable in Boxes 3 and 5.
• Withholding: Employers generally must withhold federal income tax and FICA on taxable equity compensation. Some employers allow share withholding, sell‑to‑cover, or cash withholding to satisfy tax liabilities.
• Form 3921 and Form 3922: Employers must file Form 3921 for ISO exercises that transfer stock to an employee and Form 3922 for ESPP transfers. These forms provide detail useful to employees for tax reporting.
• 1099s: Employers or brokers may issue Form 1099‑B for sales of shares; employers do not issue 1099s for wages (W‑2 is used instead).

Employers should coordinate W‑2, 3921/3922, and broker 1099‑B information so employees can accurately report transactions.

Section 83(b) election (when available) and its W‑2 effect

Section 83(b) allows an employee who receives restricted stock to elect to include the FMV of the restricted stock in income at the time of transfer rather than at vesting. Important notes:

• Timing: The 83(b) election must be filed within 30 days of grant.
• W‑2 effect: If a valid 83(b) election is made, the ordinary income is included on the W‑2 for the year of grant (the FMV at grant becomes wages). Future vesting events generally do not create additional ordinary income (but sales create capital gain or loss relative to the 83(b) basis).
• Not available for RSUs: An 83(b) election is not available for RSUs because the employee does not own actual shares at grant.

If you asked “are stock awards included in w2 if I file an 83(b)?” the answer is yes—the election accelerates W‑2 reporting to the grant year.

Common problems and corrections

Frequent issues and remedies when reporting equity compensation:

• Broker‑reported basis errors: Brokers may report incorrect basis on Form 1099‑B. Remedy: Keep employer supplements, adjust basis on Form 8949, and explain differences.
• Missing W‑2 reporting: Employer may fail to include taxable equity income on W‑2. Remedy: Ask employer payroll/tax department for correction and an amended W‑2 (Form W‑2c). If not corrected, consult a tax advisor on reporting and withholding consequences.
• Incorrect withholding: Employer may withhold too little or too much at settlement. Remedy: Coordinate with payroll to correct withholding going forward; consider estimated tax payments if withholding is insufficient.
• Late or amended W‑2s: If W‑2 corrections arrive after filing a return, file an amended return (Form 1040‑X) if the change affects tax.

Document retention: Keep award agreements, grant summaries, 83(b) election copies, broker statements, Forms 3921/3922, and supplemental employer equity statements for at least several years after disposition.

Examples (brief numeric examples)

Example 1 — RSU vest and later sale

• Vesting/settlement: 100 RSU shares vest; FMV at settlement = $50/share. Ordinary income recognized = $5,000. Employer reports $5,000 on W‑2 Box 1 and withholds taxes.
• Cost basis: The $5,000 is the basis in the shares ($50/share).
• Sale: Two years later sell 100 shares at $70/share = $7,000 proceeds. Capital gain = $2,000 (long‑term) reported on Form 8949/Schedule D.

Example 2 — NQSO exercise

• Grant: Option to buy 1,000 shares at $10/share.
• Exercise: Employee exercises when FMV = $30/share. Bargain element = ($30 − $10) × 1,000 = $20,000 ordinary income.
• W‑2 reporting: Employer reports $20,000 in wages on the employee’s W‑2 in the year of exercise.
• Sale: If shares are later sold, capital gain/loss is computed relative to basis ($10 exercise price + any amount already included as ordinary income under employer policy if applicable).

Example 3 — ISO exercise and disqualifying disposition

• Exercise: Employee exercises ISO and does not sell in the same year. No W‑2 ordinary income from the exercise for regular tax.
• AMT: The $spread may be included in AMT calculations that year.
• Disqualifying sale: If employee sells shares within one year of exercise, the spread up to the sale date may be ordinary income and may be reported on a Form W‑2 in the year of the sale.

Example 4 — ESPP qualifying vs disqualifying disposition

• Purchase: Employee buys shares through ESPP at a 15% discount. If shares are sold after meeting holding periods, ordinary income is limited and not usually reported on W‑2.
• Disqualifying sale: If sold early, employer reports the ordinary income portion on W‑2 in the year of sale.

These examples show when are stock awards included in w2 and how to compute basis and capital gain at sale.

State, local, and international considerations

• State and local tax: States vary in their approach to sourcing compensation income from stock awards (especially for employees who changed residency during vesting). Some states tax income when services were performed rather than when wages were paid—check state guidance.
• Multi‑state work: If you worked in multiple states during the vesting period, you may need to allocate income among states and reconcile withholding.
• Cross‑border employees: Nonresident aliens and cross‑border employees face complex withholding and reporting rules. Employers and employees should coordinate with tax advisors experienced in international payroll.

Because rules differ by jurisdiction, local tax rules can affect whether and how are stock awards included in w2 for state income tax withholding and reporting.

Where to look for official guidance and further reading

Authoritative sources and practitioner resources to consult:

• IRS Publication and instructions for Form W‑2 and Forms 3921/3922
• Internal Revenue Code Section 83 and associated Treasury Regulations (rules on property transferred in connection with performance of services)
• IRS guidance on FICA timing (see IRC §3121(v) and IRS memoranda)
• Broker and employer equity compensation guides (payroll and equity plan administrators)
• Practitioner resources from professional bodies (AICPA, The Tax Adviser) and major tax preparation vendors

As of June 1, 2024, according to IRS general guidance and standard Form W‑2 instructions, employers must report wages from taxable equity compensation on the employee’s W‑2 in the year the wages are includible in income.

Practical taxpayer checklist at tax time

Before you file your tax return, gather and verify these items to handle equity compensation reporting correctly:

1. W‑2 (verify Box 1 includes ordinary compensation from vested awards and exercises).
2. Form 1099‑B from your broker (check cost basis reporting).
3. Employer supplemental equity tax statements (showing FMV at vest/settlement, NQSO spread, or amounts withheld).
4. Forms 3921 and 3922 (if you received ISOs or ESPP shares).
5. Copies of 83(b) elections and proof of filing (if applicable).
6. Detailed record of grant, vest, exercise, and sale dates and FMVs for each event.
7. Notes on state residency during service/vesting for multi‑state allocation.
8. If broker basis is incorrect, prepare to adjust Form 8949 and Schedule D; keep documentation for audit defense.
9. Consult a tax advisor for complex AMT, multi‑state, or cross‑border cases.

Following this checklist reduces the chance of missing are stock awards included in w2 items and avoids common errors.

Sources and primary references used (selected)

• IRS instructions for Form W‑2 and related publications (Form W‑2 and Form 1040 instructions).
• Internal Revenue Code Section 83 (property transferred in connection with performance of services) and guidance on 83(b) elections.
• IRC §3121(v) guidance on the special FICA timing rule.
• Instructions for Forms 3921 and 3922.
• Practitioner resources (AICPA, The Tax Adviser) and major broker/employer equity compensation guides.

As of June 1, 2024, these official IRS forms and instructions remain the primary authoritative documents for employers and employees to reference when deciding whether are stock awards included in w2 and how to report them.

Common questions (FAQ)

Q: If my broker shows zero basis on Form 1099‑B, will I be taxed twice?

A: Not necessarily. The FMV included as ordinary income on your W‑2 is part of your basis. You must adjust the basis on Form 8949 so the capital gain reflects only the appreciation after the income inclusion.

Q: Are RSUs included in W‑2 if my company settles in cash?

A: Yes—if the cash payment is compensation for vested RSUs, that cash is ordinary income and is reported on your W‑2 in the year of settlement.

Q: If I filed an 83(b), does that mean I paid tax early for nothing?

A: Filing 83(b) accelerates ordinary income inclusion to the grant date. If the stock later appreciates, gains may be capital gains. If the shares are forfeited after an 83(b), you generally cannot recover the taxes paid; weigh the risks before filing.

Next steps and practical suggestions

• Reconcile W‑2 and 1099‑B: Before filing, make sure your broker’s basis reporting matches the W‑2 inclusion. If it doesn’t, keep documentation and adjust your tax return accordingly.
• Save equity statements: Keep award agreements, grant summaries, Forms 3921/3922, and supplemental statements—these are essential if you need to amend returns or respond to inquiries.
• Use Bitget resources: If you use Bitget for trading or Bitget Wallet for custody, download account statements and trade history to reconcile equity sales and basis. Bitget’s tax reporting tools and account statements may help you verify reported amounts.
• Consult a tax professional: Complex cases (AMT from ISOs, cross‑border issues, multi‑state sourcing) benefit from professional advice.

Further explore Bitget features for transaction history and wallet tracking to simplify reconciliation at tax time.

Final notes and call to action

Understanding whether are stock awards included in w2 depends on the award type and the taxable event (vest, exercise, or sale). Keep solid records, reconcile employer and broker reports, and when in doubt, consult a tax advisor.

Want help organizing your equity records? Export your activity from Bitget or Bitget Wallet and gather your W‑2, Forms 3921/3922, and 1099‑B to start the reconciliation process today.

This article provides general information about U.S. tax reporting for employee stock awards and Form W‑2. It does not constitute tax advice. For personal tax questions, consult a qualified tax advisor.