"1099 from Fidelity shows the Cost basis for all the RSU's as 0, which is understood."
Maybe you think you understand it, but you would be wrong.
"How do I specify in Turbo Tax that the income from RSU's has already been taxed before."
You don't. The income associated with the vesting of the RSUs is "compensation" income and you paid tax on that compensation income. But the sale of the stocks is a "capital" event, (capital gain or capital loss), a completely separate tax event.
Here's the real issue: You are using the wrong basis to report the sale. Your basis is not $0. Per share, your basis is the same as the "per share fair market value" used by the employer to calculate the compensation caused by the vesting. The compensation figure is:
(GROSS number of shares that vested) x (per share fair market value)
So what you need to do is adjust the basis reported on the 1099-B, (brokers only report your "out of pocket" cost to get the shares, which is $0 in this case), to the correct basis which includes the compensation.
Enter the 1099-B as it reads on the default 1099-B entry form but then click on the "I'll enter additional info on my own" blue button. On the next page enter the correct basis in the "Corrected cost basis" box. The correct basis is (number of shares sold) x (correct per share basis, which includes the compensation per share)
TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.
Tom Young
