eBay announced last week that it's cutting about 1,000 jobs, roughly 9% of the company. If you're one of them, you're probably sorting through a separation packet, a stack of HR emails, and an equity account you haven't looked at closely in a while.
Your RSUs and ESPP shares deserve attention before anything gets signed. I’ve put together this list of 3 things to look out for:
Before you sign: check your next vest date
eBay's RSUs vest annually or quarterly, and only while you're still employed. Anything that hasn't vested by your last day is typically forfeited, unless your separation agreement says otherwise.
That makes your separation date one of the most valuable numbers in the whole packet. If your next vest is a week or two after your last day, those shares disappear.
It doesn't hurt to ask HR whether your end date has any flexibility, or whether any vesting is accelerated as part of severance. The worst they can say is no. Just ask before you sign, since that's usually when you have the most room.
Shares you already own: don't pay tax twice
When your RSUs vested, their full value was added to your paycheck and taxed as income. That value becomes your cost basis. When you sell, you only owe tax on the change in price since the shares vested.
The problem shows up next year. The 1099-B your broker sends after you sell often reports a cost basis of $0, or one that's far too low.
Say you sell 500 shares that vested at $70. That's $35,000 you already paid income tax on. If your tax return uses the $0 basis on the form, it treats the entire $35,000 as a fresh gain. In the 24% bracket, that's about $8,400 in extra tax on money that was already taxed.
The fix is an adjustment on Form 8949, using the supplemental statement from your broker that shows the real basis. Make sure whoever prepares your return knows to look for it.
Your ESPP: refunds and holding periods
Money in the middle of a purchase period: if you're partway through an ESPP purchase period when you leave, your contributions are usually refunded instead of being used to buy shares. Check that the refund actually lands in your account.
Shares you already bought: when you sell them matters. ESPP shares get better tax treatment if you hold them at least two years from the start of the offering period and one year from the purchase date.
Sell before then, and the discount you received is taxed as ordinary income, just like your salary. Say your plan bought shares at $59.50 when the stock was worth $70. That $10.50 per share discount is taxed as income if you sell early. Hold long enough, and more of your profit can qualify for lower long-term capital gains rates.
That doesn't mean you should hold just for the tax break. If the stock drops while you wait, you can lose more than you save. But it's worth knowing which of your shares are close to qualifying before you sell everything at once.
Two more things to check
Severance withholding: severance is usually withheld at a flat 22% for federal taxes. If you're in the 32% bracket, that can leave you owing thousands in April. Set aside extra now.
Your 401(k): eBay matches up to 4% of your pay. Make sure you've received what you're owed for this year, and don't cash out the account. Between taxes and a likely 10% penalty if you're under 55, you could lose a third of it.
Now it's just a stock you own
While you worked at eBay, holding eBay stock made sense as part of how you were paid. Now it's simply a stock in your portfolio. Ask yourself whether you'd buy that much of it today with cash. If the answer is no, that's a reason to start selling some on purpose, with the taxes above in mind.
If you're sorting through your RSUs, ESPP, and severance and want a second set of eyes on the numbers, I'm happy to help. Click here to book a call or find some time below:
I'm Michael Walstedt, a fee-only wealth advisor at Reliant Wealth Advisory. I help tech employees navigate layoffs, severance, and equity compensation.
This article is for educational purposes only and is not tax, legal, or investment advice. Details of your equity and severance depend on your specific plan documents and separation agreement. Consult a qualified tax professional about your situation.
