Restricted Stock Units (RSUs) FAQ for US Based Employees

  1. What is a Restricted Stock Unit (RSU)?

      2. - Each Restricted Stock Unit ("RSU") is the right to receive one share of Amazon.com common stock upon satisfaction of the applicable vesting requirements. When an RSU award vests the shares automatically become yours, unlike a stock option where you are required to pay a "strike" price to acquire the shares.

  2. Am I taxed on my Restricted Stock Units?

      3. - If you are a US based employee, you will generally be taxed on the amount of compensation income you recognize when your RSU award vests and you become the owner of the shares. The amount of compensation income is equal to the number of shares vesting on the vest date multiplied by the market value of the Amazon.com common stock on the vest date. At the time of vest, Amazon.com will collect from you the minimum required tax withholding. Bear in mind that your actual tax liability depends on your personal circumstances and may differ from the taxes withheld. As such, the taxes withheld from your RSU income may be more or less than the taxes you actually owe as a result of the vesting of your RSU award.

      -Further, any shares you receive upon the vesting of an RSU award that you retain and sell at a later date (other than a sale to cover withholding taxes) may result in additional tax obligations depending on whether you realize a gain or loss on the transaction. You should consult your personal tax advisor for information regarding the tax implication of holding, selling, or transferring your vested shares.


      NOTE: The tax information contained in this FAQ only provides a general summary of the applicable U.S. federal income tax laws. It does not address all possible tax aspects of transactions that may arise under the plan and does not constitute personal tax advice. The tax laws and regulations are complex and are subject to change. In addition, circumstances particular to certain individuals may change the usual income tax results. Further, state and local income taxes may also be applicable. If you are a resident of or are employed in a country other than the United States, you may be subject to taxation in accordance with the tax laws of that particular country in addition to or in lieu of U.S. federal income taxes.

      FOR THE FOREGOING REASONS, IT IS IMPORTANT THAT YOU CONSULT A TAX ADVISOR AS TO THE INCOME TAX CONSEQUENCES OF ANY PARTICULAR TRANSACTION.

  3. Will Amazon.com withhold taxes when my Restricted Stock Units vest?

      4. - Yes. Amazon.com will apply the applicable tax withholding rates, which vary by country and local tax jurisdiction, to calculate the amount of tax withholding. Unless you have made other arrangements to pay the tax withholding, on the vest date a portion of your vested shares having a value equivalent to the tax withholding amount calculated by the Company will be sold on your behalf. The cash generated from that sale will be remitted by Amazon.com to the relevant tax authorities

      - It is important to note that your actual total tax obligation as a result of the vesting of your RSUs may be greater than the amount withheld, and you are solely responsible for paying any additional amounts owed.

  4. How is the tax withholding calculated?

      5. - Tax withholding rates are established and applied based on local country rules and input from Amazon.com's Tax Department.

      - For US Citizens and/or US Taxpayers
      The US government sets the applicable withholding rates on any income realized upon the vesting of an RSU. These rates are subject to change from time to time. Current rates are as follows:

      • - Federal income tax: minimum of 25%.

      • - State income tax: applicable state rates apply.

      • - Social Security employment tax: 6.2% on all compensation income up to $90,000 (for 2005). This number is indexed annually.

      • - Medicare employment tax: 1.45% (no limit).

      - There may also be non-US tax withholding requirements based on your country of citizenship and/or your employment history with Amazon.com.

      Non-US Employees and Current or Former Expatriates, Away Team Members and International Permanent Transfers
      - For employees working outside the US: Your RSUs will be subject to taxation and withholding requirements in accordance with the laws in the country where you are employed as of the RSU vesting date and the country where you were employed when the RSU was granted. Please review the requirements with your HR contact.

      - For employees who are currently or have previously been migratory employees (i.e., working from Amazon.com in more than one country as Expatriates, Away Team Members and/or International Permanent Transfers): Each time your RSU award vests, the Company will review your residence status and employment history with the Company and collect appropriate non-US and/or US tax where required. It is possible that the Company will be required to withhold taxes for, or that you will be required to file tax returns with, more that one state or country for each RSU transaction.

      - In addition to the taxes described above, if Charles Schwab does not have a current Form W-9/W-8, properly completed and signed by you, on file as of any RSU vesting date, they are required by US law to withhold 28% (for 2005) of the proceeds of any vested RSU shares sold on your behalf.

  5. How is the value of my vested RSU shares determined for tax purposes?

      6. - Generally, the value of your vested RSU shares will be determined by the market value of the Common Stock of Amazon.com on the RSU vest date (or the first trading day after the vest date if the vest date is not a trading day). That market value will in turn generally be determined by the average price at which all shares are sold to cover withholding taxes with respect to RSUs having the same vest date. This average price is the price that will be reported on the Forms 1099-B distributed by Charles Schwab and the Forms W-2 (or such other form as may be required for non-U.S. employees) distributed by the Company or its subsidiaries.

  6. How do I make a tax election for my RSU Grant?

      7. - Those elections must be made by phone (1-800-654-2593) at Schwab or on line at the Equity Award Center at Schwab. Please view the FAQ section on the intranet for additional questions regarding RSUs or stock options.

  7. How do I pay the tax withholding when my RSUs vest?

      8. - You may satisfy the tax withholding obligation in one of the following ways:

      Sale through Charles Schwab.

      Unless you make some other acceptable arrangement to cover the tax withholding obligation, Amazon.com will automatically arrange for the sale on your behalf through Charles Schwab of enough shares to produce the amount necessary to cover the tax withholding obligation, plus related brokers' fees and other costs of sale. These shares will be aggregated with all other employees' shares that are to be sold with respect to the same RSU vest date and such shares will together be sold as an "average price trade" by Smith Barney. Although the shares may be sold in multiple executions on the same sale date, your RSUs will be valued at the average price at which all such shares have been sold rather than the actual market prices at which the individual executions take place. The cash generated from that sale will be remitted by Amazon.com to the relevant tax authorities. To the extent the proceeds of such sale exceed your Tax Withholding Obligation, the Company agrees to pay such excess in cash to you through payroll or otherwise as soon as practicable.

      RSU Cash Tax Payment

      Timing: Any employee considering the delivery of cash in payment of tax withholding due upon any vesting of a restricted stock unit award should contact Stock Administration (stockoptions@amazon.com; phone 206-266-4241) or Charles Schwab (1-800-654-2593) at least two weeks prior to the vest date to learn how, when and where the payment is to be delivered and how it will be calculated.

      Calculation of Tax Withholding: Stock Administration or Charles Schwab will calculate the estimated tax withholding due and will send a worksheet with the calculation to you on the10th trading day prior to the applicable vest date. The estimate will be based on the closing sale price of the Company's Common Stock on the 10th trading day prior to the applicable vest date. The actual amount owed for tax withholding will be based upon the market value of the Common Stock of Amazon.com on the RSU vest date (or the first trading day after the vest date if the vest date is not a trading day), and may be more or less than the estimated amount. If the amount you deliver to Schwab exceeds the actual tax withholding liability, the excess will be left in your retail account. If the amount you deliver to Schwab is less than the actual tax withholding liability, Schwab will collect the balance from you immediately or sell shares from your account to cover the shortfall.

      If Payment is Not Timely Received: If receipt of your tax withholding funds cannot be verified by Charles Schwab by 5:00 PM on the 5th business day (Seattle time) prior to the applicable vest date, the Company will, in accordance with Section 9(b)(i) of your RSU award agreement, arrange for the sale on your behalf of a portion of the shares issuable to you with respect to such vest event to generate cash proceeds sufficient to satisfy the tax withholding obligation.

  8. Can I arrange to pay more than the minimum required tax withholding?

      9. - If you are a US taxpayer, you may increase your US federal income tax withholding rate up to 35% from the 25% minimum prior to any RSU vest date, which will result in a greater number of your shares being sold at each vest date. This election may be made directly at the Schwab equity award center or by phone 1-800-654-2593. This election will apply to all vests of the RSU award that you adjust your tax rate. Your ability to increase your federal income tax withholding rate is subject to the Company's insider trading policy - if you are restricted to the trading window, or require preclearance by Legal prior to trading, then you may only increase your income tax withholding rate when the trading window is open for you and you have received clearance from Legal if required. Any election made within five business days prior to any RSU vest date may not apply with respect to such vest event.

  9. How do I get my vested RSU Shares?

      10. - Generally, all unsold vested RSU shares will be deposited to your Charles Schwab brokerage account by the end of the 3rd trading day after the RSU vest date. If a Charles Schwab brokerage account has not previously been established for you, you should, prior to your first RSU vest date open your account with Schwab.

  10. Where do I deliver my completed W-9/W-8 form?

      11. - W9 forms are part of the Schwab application. W-8 forms must be filled out separately and sent into Schwab.

  11. Are there any restrictions on selling my vested RSU shares?

      12. - All employees need to be aware of Amazon.com's Insider Trading Policy and related guidelines when selling shares of Amazon.com stock. Certain employees can only trade Amazon.com securities, including the shares received upon vesting of their RSUs, during designated trading windows and/or may require pre-clearance from the Amazon.com Legal Department.

  12. Where should I send questions about how the trading window and preclearance requirements apply to me?


  13. How do I sell my vested RSU shares after they are have been delivered to my Charles Schwab account?

      14. - You can sell your vested RSU shares by using Schwab Equity Center (online):

      http://scs.schwab.com/amazon

      or by using a Schwab broker over the phone: 1-800-654-2593.

  14. How do I contact Charles Schwab about my RSU shares?

      15. - You can view your vested RSU shares by using Schwab Equity Center (online):

      http://scs.schwab.com/amazon

      You will want to look in the Overview section; on the right hand side of the page you will see a box titled “Select Account” with a drop down menu in it. Click onto the menu and click onto the other "account", it is probably your first name. Next, you should be on the Retail account side with Schwab. If you click onto the Balances tab, you should be seeing some cash in your account left over from the shares sold to cover taxes if any was due to you. If you click onto the Positions you should be able to view your available RSUs. When you click onto history, you can view the shares that were sold to cover taxes from your RSU vest. To get information about your RSU shares or Schwab account by phone, contact a Schwab customer service representative who supports Amazon.com's restricted stock unit program at the appropiate numbers below:

      Schwab Contact Information:

      Website: equityawardcenter.schwab.com
      US Toll Free: 1-800-654-2593

      International callers may reach Schwab toll-free at the same number, 1-800-654-2593, by utilizing the international toll-free dialing guide.

      These numbers currently are:

      France: 0800 9900 11 800-654-2593
      UK (BT): 0800 89 0011 800-654-2593
      UK (C&W): 0500 89 0011 800-654-2593
      Germany: 0800 2255 228 800-654-2593
      Luxembourg: 800 20111 800-654-2593
      Japan (KDDI): 00 539 111 800-654-2593
      Japan (IDC): 00 665 5111 800-654-2593
      Japan (JT): 00 441 1111 800-654-2593

      To better accommodate our overseas clients, international calls are answered 24 hours a day, Monday - Friday (except holidays as determined by the NYSE schedule)

  15. Can I arrange in advance to sell my RSU shares when they vest under a 10b5-1 trading plan?

      16. - You may enter into a Rule 10b5-1 trading plan with any broker approved by Amazon.com in order to arrange for the sale of your vested RSU shares upon vesting. The terms of such plan are subject to approval of Amazon.com. Such a plan must include, in addition to the other trades, an instruction to the broker to sell at the market price on the vest date (or the first trading day after the vest date if the vest date is not a trading day) a sufficient number of vested RSU shares to generate funds to pay the estimated required tax withholding (a "tax sale"). To implement a trading plan covering RSUs to be sold upon vesting, you must notify Amazon.com Stock Administration (stockoptions@amazon.com; phone 206-266-4241) and obtain an estimate of the number of shares that must be sold to satisfy the tax withholding. Your social security withholding obligation will be calculated at the maximum 6.2% (for 2005) regardless of whether you expect to exceed the social security maximum at the time of execution of the tax sale.

      Any proceeds from a tax sale that exceed what is required to satisfy the minimum required tax withholding will be applied to your federal income tax withholding and no amounts will be refunded to you by the Company. If the proceeds of the tax sale are not sufficient to cover all required tax withholding, the Company will collect any shortage from you. If you implement a trading plan covering RSUs that includes a tax sale, all of your RSU shares will be delivered upon vesting to your account with the broker executing the plan, even if less than all of such shares are scheduled for sale under the plan.

      You may also establish a trading plan with respect to RSUs shares after they have vested. In that case, unless you are subject to preclearance under the Amazon.com insider trading guidelines, you may enter into a plan with any broker you choose. Such a plan should not provide for trades to occur sooner than you expect to have the shares available in your brokerage account - allow at least 3 trading days after vest date for trades scheduled through Smith Barney and longer if the shares then need to be transferred by you to another broker.

      For more information about setting up Rule 10b5-1 trading plans, please see the following web link: http://ht.amazon.com/dept/legal/corp-sec/insider-trading/10b5-1.mhtml

  16. Where can I get more information?

      17. - Please review this site thoroughly for more information on restricted stock units. If you have further questions about restricted stock units or the administration of Amazon.com's stock programs overall, please email stockoptions@amazon.com. If you have questions about your particular situation, please contact your HR generalist.

  17. How do I accept my grants online?

      18. - US Employees can accept/collect their RSU agreements online at Schwab. This means 5 year anniversary, new hire, and any older Annual grants from 2002, 2003, 2004. Schwab will limit a participants access if ANY of their grants have not been accepted. Here is a brief description on how to access & accept grants online.

      1. Log into the Schwab account at: http://equityawardcenter.schwab.com (this link takes you to "your personal Schwab Retail Account")
      2. In the Select Account Box click on the "Equity Award Center" option.
      3. You are now in the Amazon.com Options and Awards Equity Portfolio
      4. Go to the Options and Equity Awards Tab
      5. Find the grant you want to accept
      6. Clicking on the "Accept/Reject" link in the Grant Acceptance column will launch the award letter.
      7. Read and scroll to the bottom of the letter and click the "Accept" button.
      8. After the award is accepted, the "View/Print" link is still enabled so that the award letter is always available for review.

  18. For those that are not able to manage their accounts online.

      19. - Employees will receive their grant paperwork at their work location from their HR Representative; then sign and hand in their signed/accepted agreements to their HR representive; this includes all employees levels 1-3.

  19. What if I have not received my grant yet?

      20. - Employees can expect to see their grants within six month of their hire date.

  20. What if I review my award online and still have questions about the vest schedule or other terms and conditions of my agreement?


  21. How do I elect 100% sell (levels 1-3 only)

      22. - Those elections must be made by phone at Schwab: 1-800-654-2593 or on-line by going to Schwab's website.

Federal Income Tax FAQ for US Based Employees

  1. What is a 1099-B? Why did I receive a 1099-B?

      2. - You have received the 1099-B as a result of the Restricted Stock Unit (RSU) program offered by Amazon.com. Charles Schwab was either instructed by you to sell your RSU shares or shares were sold to cover any withholding taxes. A Form 1099-B is required to be sent to any individual that sells stock. The information on the 1099-B will need to be reported on your Form 1040, U.S. Individual Income Tax Return through a Schedule D.

  2. What federal income tax form must I file?

      3. - The IRS requires that any taxpayer that receives a 1099-B, must file a Schedule D along with a Form 1040, U.S. Individual Income Tax Return. Form 1040-EZ and 1040-A do not allow for the attachment of Schedule D. Therefore, only Form 1040 can be filed.

  3. Can I still file a Form 1040-EZ or 1040A?

      4. - Even though you may have filed Form 1040-EZ or 1040A in the past, if you have received a 1099-B you must file a Form 1040, U.S. Individual Income Tax Return. Form 1040 uses the same tax rates and deductions as the 1040-EZ and the 1040A. Form 1040 just allows for additional items to be reported, such as Schedule D capital gains and losses.

  4. Where can I find tax forms?

      5. - Tax forms are available at the post office or public library. In addition, forms can be downloaded from the IRS website at www.irs.gov.

  5. What if I use H and R Block, Turbo Tax or some other tax preparation service?

      6. - You will need to obtain the following information for use in preparing your Schedule D:

      • Vested date of the RSU (October 1, 2004 for the first vesting date, see FAQ) Listed on the Equity Compensation statement from Charles Schwab in column "Value Date". Also outlined in your RSU agreement.
        You can now view your Equity Compensation statements online by logging into your account at http://scs.schwab.com/amazon. From "Account >> eDocuments" page of the website, you can select a statement from the dropdown menu to view, print or save. From this screen, you may also elect to receive notification via email of Equity Compensation statement availability each quarter and, if you choose, opt out of receiving paper statements sent by mail. The first statement in the archive is the year-end 2005 statement; going forward, each quarter's statement will be added and prior statements (beginning with year-end 2005) will remain available to you.

      • Vested value (Basis) of the RSU shares on the vesting date ($48.259 if vested on October 1, 2003, see FAQ) Obtained from the be Equity Compensation Statement from Charles Schwab, listed in column "Value Basis".

      • 1099-B from Charles Schwab

      - You might consider completing a Schedule D according to the instructions as outlined below, and using the schedule when talking to the tax preparer or inputting information into the software.

  6. What are best practices for keeping records?

      7. - You should keep all broker statements and any other documents that show basis for all investments that you own

      - The documents should be kept until the investment is disposed. They will be necessary to determine capital gain/(loss) on the investement on your tax return

      - The documents should then be kept with a copy of your federal income tax return for at least three years

      - Please refer to the Basis Tracker to keep a record of your RSUs

  7. What about withholding taxes on my W-2?

      8. - Since the vesting of RSU generated ordinary income, a portion was withheld to pay applicable taxes. The withholding will be included in box 2 of your W-2. Box 4 of the 1099-B does not show any withholding and is not applicable in this situation

  8. What if I did not receive a 1099-B?

      9. - There is only one situation where you would not receive a 1099-B; if you did not sell any stock. If you delivered cash to Charles Schwab equal to the amount of your withholding requirement, and no stock was sold in your account, then you will not receive a 1099-B relating to the RSU plan and you do not have to file a Schedule D.

      - If Charles Schwab sold stock to cover your withholding requirements, or you instructed them to sell additional shares, then you should have received a 1099-B. If you believe that you should have received a 1099-B please contact Charles Schwab at the numbers below to obtain a copy.

      Charles Schwab Contact Information:

      Website: equityawardcenter.schwab.com
      US Toll Free: 1-800-654-2593

      International callers may reach Schwab toll-free at the same number, 1-800-654-2593, by utilizing the international toll-free dialing guide.

      These numbers currently are:

      France: 0800 9900 11 800-654-2593
      UK (BT): 0800 89 0011 800-654-2593
      UK (C&W): 0500 89 0011 800-654-2593
      Germany: 0800 2255 228 800-654-2593
      Luxembourg: 800 20111 800-654-2593
      Japan (KDDI): 00 539 111 800-654-2593
      Japan (IDC): 00 665 5111 800-654-2593
      Japan (JT): 00 441 1111 800-654-2593

  9. What is a Schedule D? Do I need to file a Schedule D?

      10. - A Schedule D reports any capital gains or losses on your Form 1040, U.S. Individual Income Tax Return. You must file a Schedule D (and Form 1040) if you have sold stock (received a 1099-B).

  10. What if I already filed my 2005 taxes and did not file the Schedule D?

      11. - You will need to file Form 1040X, Amended U.S. Individual Income Tax Return in addition the Form 1040 that has been revised to account for the Schedule D.

  11. What if I received a notice from the IRS concerning my 1099-B?

      12. - You will need to follow the instructions as outlined in the IRS notice. If the notice is claiming that you did not file a Schedule D then you will need to file Form 1040X, Amended U.S. Individual Income Tax Return in addition the Form 1040 that has been revised to account for the Schedule D.

  12. How do I complete the Schedule D?

      13. - The steps outlined below will assist you in completing your Form 1040, U.S. Individual Income Tax Return and the related Schedule D. You will need to obtain the following items prior to completing the schedule:


    • Vested date of the RSU (October 1, 2004 for the first vesting date, see FAQ) Listed on the Equity Compensation statement from Charles Schwab, in column "Value Date". Also outlined in your RSU agreement.

    • Vested value (Basis) of the RSU shares on the vesting date ($48.259 if vested on October 1, 2004, see FAQ) Obtained from the Equity Compensation Statement from Charles Schwab, listed in column "Value Basis".

    • 1099-B from Charles Schwab

        • Column (a) - Description
      • Enter "Amazon.com" and the number of shares sold

      • Described in Box 5 on the 1099-B

        Column (b) - Date Acquired
      • Enter the date that the shares vested

        Column (c) - Date Sold
      • Enter the date that the shares sold

      • Listed in Box 1a on the 1099-B

        Column (d) - Sales Price
      • Enter the sales proceeds

      • Listed in Box 2 on the 1099-B

        Column (e) - Cost or Other Basis
      • Enter the total basis of the shares sold

      • Total basis is the vested value per share multiplied by the number of shares

        Alternatively, if you are unable to determine the basis using the above method, you can calculate basis per share with the closing price of Amazon.com (ticker: AMZN) on the date your RSU shares vested. The following websites can be used to find the historical price:
        http://chart.yahoo.com/d
        http://bigcharts.marketwatch.com/historical

        Column (f) - Gain or (Loss) for Entire Year
      • Subtract column (e) from (d)

      • Note: Be sure to use a minus sign if a loss

  13. What is the vesting date?

      14. - This date should be outlined in your RSU agreement It is also shown on the Equity Compensation Statement from Chales Schwab in column "Value Date".

  14. What is the basis of my RSUs?


  15. If the income is reported on my W-2 why do I need to fill out the Schedule D?

      16. - Schedule D will calculate a gain or loss on the sale of the stock. If you received a 1099-B then Charles Schwab sold some or all of your RSU shares. If you sold stock on the same day that it vested, then your Schedule D will most likely show a slight loss. The amount of the loss should equal any Charles Schwab commissions and additional fees.

      - Your W-2 will show the amount of income earned whereas the Schedule D will show the realized gain or loss due to appreciation or depreciation in the value of your shares from the vesting date. You are not taxed twice on the same income.

  16. After completing the Schedule D, I have a net loss. What does this mean?

      17. - This loss can be deducted against your regular taxable income on your Form 1040, U.S. Individual Income Tax Return and will decrease the amount of your total taxes.

  17. After completing the Schedule D, I have a net gain. What does this mean?

      18. - This gain will be added to your taxable income on your Form 1040, U.S. Individual Income Tax Return and will increase the amount of your total taxes.

  18. What happens next year if I still own RSU shares in my account?

      19. - If you still own RSU shares in your Charles Schwab account, then you may sell those shares whenever you like*. If you hold the shares for longer than one year, then you will receive a preferential tax rate on the gain, currently 5% or 15% depending on your level of income. If you hold the shares for one year or less, then any gain will be taxed at your ordinary income tax rates. Once you sell shares, you will receive a 1099-B and will have to complete a Schedule D with your Form 1040.
      *Subject to Amazon.com trading window restrictions. See FAQ above.

  19. What if I work outside the U.S.?

      20. - A foreign jurisdiction may imposes additional withholding and income taxes on income realized attributable to the RSU. Please consult your tax advisor.

  20. How does this relate to my 401(k)?



 

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