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Investors & landlords
" I don't have an entry in box 14, but do have a $ amount in box 12c along with a "V". Same thing/good enough?"
YES.
When an RSU vests, that act of vesting creates compensation reported on the W-2. The calculation of the compensation is:
(GROSS number of shares vesting) x (per share FMV at vesting date - per share out of pocket cost of to acquire)
With RSU's you typically don't have to pay anything to acquire the stock so that equation simplifies to:
(GROSS number of shares vesting) x (per share FMV at vesting date)
Since after-tax compensation income is created by the vesting your basis in the GROSS number of shares is the same as the compensation. From this it follows that your per share basis is simply:
(Compensation created by the vesting) divided by (GROSS number of shares vesting)
and that per share basis figure is the figure you use for any sales of that stock.
IF you understand that THEN there is no need to use TurboTax's RSU step by step interview to report sales of the stock. That interview has utility only if:
- You don't know the basis of your stock, (but you do), or
- The compensation created by the vesting wasn't reported on a W-2, (but yours was)
Starting in 2014 brokers were only acquired to report the "out of pocket" cost of employer stock on the 1099-B. Since most RSU's don't require any out of pocket cost the typical 1099-B reports a basis of $0. So if you simply enter the 1099-B as it reads and don't correct the cost basis you end up reporting income twice: once on the W-2 and then again as an overstatement of gain on the 1099-B.
(When people see their tax liability go up when the enter a 1099-B with the wrong basis reported on it they frequently figure that they need to somehow report the cash raised by the sale of shares "for taxes" in order to correct the problem. That's entirely wrong. The cash raised by the sale of stock "for taxes" relates entirely to the compensation income created by the vesting and those taxes are already reported on the W-2.)
To avoid double reporting of income, (assuming the 1099-B is reporting that incorrect basis to the IRS), you:
- Enter the 1099-B as it reads.
- Click the blue "I'll enter additional info on my own" button.
- On the next page enter the correct basis in the "Corrected cost basis" box. The correct basis is: (# of shares sold) x (per share basis for that lot.)
Tom Young