Since the lockup expires in the same tax year, can't they just sell after the lockup, take the loss, and then use the loss as a write off against the RSU gain so they only pay taxes on the actual realized gain?
The initial RSU settlement is taxed as ordinary income. If they sell below the IPO price in future (e.g. to cover their remaining taxes) they'll indeed realize a capital loss but it can only be carried forward against future capital gains from e.g. longer-term holding of UBER or another stock, or using the $3000/year deduction for ordinary income.
Is that really true? Hard to believe since they are facing potentially millions in taxes!
It is true and I also find it amazing that the company seemingly did nothing other than withholding 22% (below1M$). It seems like the switch to RSUs did not take into account the downside risk.
> ... did not take into account the downside risk.
Web 2.0 companies in a nutshell
It's correct. In the case of Uber, the company withheld shares according to the supplemental wage withholding rules (22%) at the federal level. Employees would still be liable for the extra 10-15% of the IPO price if taxed in the highest tax bracket.
> withheld shares according to the supplemental wage withholding rules (22%) at the federal level
Is the difference refunded through tax returns?
Yes, though most Uber employees (and tech company employees in the SF Bay Area in general) are going to be above the 22% bracket, and thus will owe more tax instead of being owed a refund. This is especially likely if the employee is mostly vested and thus settling a large block of RSUs all at once.
What % of employees with stocks would that apply to, in your estimation?