Recently encountered a situation regarding the correct way to process Restricted Stock Units from a payroll perspective.
Joe, who works in a Canadian subsidiary of a US company, was awarded 100 RSU’s in 2009 that were vested until Mar 2010. The fair market value at the time of vesting was $10 share or $1,000 total. Assume a tax rate of 46%.
From a payroll perspective, would the correct way to process the award be to:
• Process through payroll as a non-cash transaction
• Record the FMV of $1,000 as income. Make sure that the amount is identified in boxes 14 and 38 of the T4
• Record the federal taxes of $460 and submit them to the CRA. Box 22 of the T4.
• Net result is the annual income and taxable portion will increase (similar to a taxable benefit)
When Joe wants to cash out the shares, he will record a Capital gain/loss on his personal income taxes.
My main focus is on how to correctly record the transaction of the vested RSU’s through a Canadian, Ontario payroll point of view.
TIA
Edit - The $1,000 was the net balance from the US Company. I believe that the US Company would have to take a witholding tax amount?
Joe, who works in a Canadian subsidiary of a US company, was awarded 100 RSU’s in 2009 that were vested until Mar 2010. The fair market value at the time of vesting was $10 share or $1,000 total. Assume a tax rate of 46%.
From a payroll perspective, would the correct way to process the award be to:
• Process through payroll as a non-cash transaction
• Record the FMV of $1,000 as income. Make sure that the amount is identified in boxes 14 and 38 of the T4
• Record the federal taxes of $460 and submit them to the CRA. Box 22 of the T4.
• Net result is the annual income and taxable portion will increase (similar to a taxable benefit)
When Joe wants to cash out the shares, he will record a Capital gain/loss on his personal income taxes.
My main focus is on how to correctly record the transaction of the vested RSU’s through a Canadian, Ontario payroll point of view.
TIA
Edit - The $1,000 was the net balance from the US Company. I believe that the US Company would have to take a witholding tax amount?