Unpaid income tax on Restricted Stock Units

Discussion in 'Tax' started by Walter_1968, Aug 7, 2018.

  1. Walter_1968

    Walter_1968 New Member

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    5
    Hello,

    I'm new to the board and I have a question and hope that someone can help.

    I work for a multinational company and a while ago I was awarded some Restricted Stock Units in batches that vest over a number of years and are deposited in a US broker account. My only income in the last 10 years + has been my Paye wage so I have never paid any external taxes and never did any tax return. I'm not even registered for the online tax facility.

    The first batch of RSU vested on December 2017 and I sold them last week and started to check what tax I would have to pay. Unfortunately after a bit of research, it looks like that I wrongly assumed that the tax was only due at the time of the sale, but instead I should have paid the income tax back in December on the day when the stocks vested. I wonder how can I rectify and pay that now ? It’s a relatively small sum (around 1000 €) so I believe the tax will be around 50% ~500€

    Thanks
    Walter
     
  2. thos

    thos Frequent Poster

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    Taxes due are income tax at the point when the stock vests, and then if you hold the shares for a period of time you are liable for capital gains on any gains / growth in the share.

    Have you talked to your payroll dept about the taxes due on the RSU when it vested? It would be worth discussing with them to understand what they did for you in the month the RSU's vested.

    There is an annual Capital Gains Tax (CGT) exemption of €1270 per annum, so sounds like you should be ok on that front.
     
  3. Walter_1968

    Walter_1968 New Member

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    5
    Thanks Thos,

    I called the payroll office (they are located either in India or Eastern Europe) there is nothing local in Ireland. After waiting 20 minutes on the phone they told me that the shares allocated are normally subject to local income tax on vesting day, then capital gain in most places as you mentioned, and it depends on the country of residence. Since I filled a W8-BEN form last year when the account was opened I will not be subject to any tax in the U.S. but I need to sort it out on my own with the rules of the country where I live. I suppose the best action is to contact a tax accounting office and see if they can get it sorted.

    Thanks /Walter
     
  4. mathepac

    mathepac Frequent Poster

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    6,507
    I can't believe you have no one to advise you except Revenue or a tax accountant. You do realise that you will probably be opening a can of worms if you have made no returns for the last 7 years?

    Contact your country HR department and ask for country specific guidance from them. It's not about being caught out "on the fiddle", it's the sheer drudgery of gathering documentation and doing sums (carefully!!) off-line. Do you know any bookkeepers?

    I must have been spoiled years ago as advice always seemed to be 'on tap'. I worked for 3 multinationals where shares/share options featured.
     
  5. Walter_1968

    Walter_1968 New Member

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    5
    Thanks Methepac for getting back to me, but why should I have done a tax return for the last 7 years ? Until December 2017 for the last 10 or 11 years my only income had been my paye wage as I described in my original posting, no other income. Then in December 2017 I got the first batch of shares vested that generated my only extra-payee income in the last 10 years. Are people in receipt of Paye income only, supposed to file a tax return as well? I can ask my HR dept. yes but my situation I guess it is not too complicated. I only need to find out how to pay and declare that unpaid tax that I should have paid in December. I have no capital gain either since the shares dropped slightly since December.

    Thanks
     
  6. thos

    thos Frequent Poster

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    How many employees does this company have in Ireland? As far as I'm aware your payroll dept should have looked after this, the same way they should be looking after other income tax related issues like BIK or others. As above, push it with HR also if needed.
     
  7. Walter_1968

    Walter_1968 New Member

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    5
    Thanks Thos, I will contact HR tomorrow and hope to find out. The company has about 1000 employees in Ireland
     
  8. Mary55555

    Mary55555 Registered User

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    45
    Last edited: Aug 7, 2018
    Hello,

    1) In general PAYE employees are not obliged to file tax returns unless they have other income/ gains/ losses or Revenue asks them to..

    So no obligation to file return for 2017 (see point 2 below) but I think you have to file one for 2018 for the disposal of the shares at loss... so People will say why bother filing a return with losses and what’s the implication.. probably not much in reality ( there is bigger fish out there) but technically its the right thing to do and you will have till 31.10.2019 to prepare the return...


    2) From what I understand RSUs are to be taxed through the PAYE system/ via your payroll. They are not the same as share options .. so I think you should have a look at maybe your December 2017 payslip ( and maybe November 2017 and January 2018 too) to see if there was any mention of the RSUs there with it being taxed .. so I think it’s your employer responsibility and there is no requirement on you to file tax return... maybe talk to the tax /HR department if nothing pops up on the payslip...

    I have set out below revenues manual on it.. it’s easy reading.. and it sets out who responsible for what with regards taxes..

    https://www.revenue.ie/en/tax-professionals/tdm/share-schemes/chapter-02.pdf
     
    Last edited: Aug 7, 2018
  9. mathepac

    mathepac Frequent Poster

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    6,507
    The answers are the same in both cases. Answer the following questions for yourself:
    1. Do you routinely check that your tax-credits, cut-off points and tax-rates, etc are correct on certificates issued from Revenue annually?
    2. Do you know what your entitlements are in order to check the above?
    3. Do you routinely check that you your payroll department deducts pension, tax, PRSI, etc correctly each pay-period and for the year as a whole?
    4. Have you ever had tax deducted on an emergency or week 1 basis?
    If your answer is "No" to any of the questions 1 to 3 or "Yes" or "I don't know" to number 4, then you need to sit down and figure out how to request P21 balancing statements for each of the last four tax-years. Tax offices make mistakes, payroll departments make mistakes, the guys who write payroll software make mistakes, but if your taxes are wrong, it is your responsibility to fix them.

    If you get no help inhouse in relation to your RSU/RSOs, then Revenue may root around in your tax matters for the last 7 years to bring you up to date. That is their entitlement.
     
  10. dublin67

    dublin67 Frequent Poster

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    111
    RSUs are taxable entirely through the payroll system from 2011. Share options, which are a very different creature, are taxable through the RTSO system.

    RSUs, of themselves, don't generate a requirement to file a tax return as they are identical to salary or benefits. If your employer has taxed the RSUs correctly then you should have to take no further action on their acquistion. Selling the shares, as mentioned above, does generate a potential captial gains tax liability.

    I've worked a lot in this area and I'd be very surprised if a company with 1,000 employees has got this wrong. If they have they could be looking a massive liability going back years. Multinationals, esp. U.S. ones, are generally well-up on withholding requirements in relation to share awards. I'd suggest looking through your payslips and see if you have a tax deduction for the tax on the RSUs - it would manifest itself by a drop in your net income as the PAYE on the RSUs would be deducted from your salary.
     
  11. Walter_1968

    Walter_1968 New Member

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    5
    Thanks folks yes you are right. I checked with HR and then the payroll from December and there was indeed a tax deduction. I didn't notice before. We get the online electronic payslips and did a search on the PDFs for RSU Restricted etc. and nothing was found, but there was a deduction. Also back in December we received the yearly bonus and had some overtime so the paycheck was higher than normal and didn't notice the tax deduction back at the time. Thanks for the clarification and sorry for the confusion generated

    Walter
     
    Mary55555 likes this.