Do I need to change my cost basis for RSUs if a portion of them were sold to cover taxes?

[jicowan]

For example, say 100 RSUs vested and 25 were sold to cover taxes.  Later in the year I sold the 75 shares that were deposited in my brokerage account.  Do I used the cost basis reported on the 1099-B or do I need to adjust it?

[JimboBigbelly]

For 2018, if you received an RSU for a publicly traded company, your company's brokerage services and your company's payroll have already communicated, and the value of your RSU has already been rolled up into your w2.  You can check that by looking at your paystub for the period of vesting date, and the previous pay stub, and see if the numbers are correct.

The cost basis in the instant before that rollup was 0.  The cost basis after that rollup is done is the Fair Market Value (FMV) of the stock which is the closing price of the day the stock was vested (to you).  That is because your tax obligation is immediate and is considered a short term gain so is put into your "wages" bucket.

Sometimes, your company will decide to "withhold" some of your shares, and will contribute cash to your wages and tax buckets instead based on some policy decision by senior executives.  This is *not* shares sold, and you will not receive a 1099B because the shares were not sold, they were transferred to your company.  This is done to cover your butt because the tax on those vested shares is due on vesting, and to "withhold" shares and pay your tax buckets with cash eliminates (probably, see below) your penalty for underwithholding.  The company's policy decision is an absolute no-win for the company people making the policy decision.  If they decide too high a percentage, and the stock price rises, you don't realize the gain because you don't have the shares anymore.  If they decide too low, then you have to come up with a bucket of money to pay your taxes.  And the policy is set for all RSUs, whether they are large, or small.

In my case, the entire RSU is rolled into my Wages bucket.  My CPA does not report RSUs on Schedule D. to avoid double taxation.

In your case you don't say whether the value of the RSU is or is not rolled into your W2. And it will make a difference on your cost basis calculation.  You'll have to do the calculation to make the determination on how to adjust your cost basis.

So look on your pay stub for the date of the vesting, and see if your wages got a bump of 100*stock price on date of vesting (assuming your grant cost was 0, my experience is that they usually are)  In that case you would have to calculate your cost basis for each sale as

Number of shares sold * stock price on vesting date

That way TurboTax will calculate the tax on the gain(loss) of the sale, without penalizing you for the taxes already owed on the wage bump.

If you don't see the wage bump, then you have to use 0 as your cost basis for both sales.

If you don't see the wage bump and you didn't sell all the shares within one calendar year, you have to adjust your income on line 14 of Schedule 1.  Which means you have to get TurboTax to trigger form 4797 for 2018  You get to that under "sale of business property".  You would enter the income as

Number of shares left unsold * stock price on vesting date

[jicowan]

In my case, my company withheld RSUs to cover taxes when they vested.  The issue I'm struggling with is the price of the stock at the time the RSUs vested was higher than the price I eventually sold them for.  Does mean that I will have a negative cost basis?

[JimboBigbelly]

OK, I thought that would be the case.  The entire value of your RSU has been rolled into your W2 wage bucket.  That amount is FMV of your stock times the number of shares in your award.  That sets your cost basis for every transaction you make after vesting day.   Your future per share cost basis is the price of the stock at the close of day of the vest.  Your example is quite simple, so that's it, and you don't enter any numbers for the vest in TurboTax.  Your brokerage and company has already done it for you.

Then for your sale of the 75 shares, you would use the stock price at close of vest day * 75 as your cost basis.  In your case, when you enter that sale, TT will calculate a short term loss.  Sorry.

But usually it's not that simple.  Calculating cost bases can be quite difficult.  If you have say, 75 shares of that stock in your brokerage account from last year, you would use the cost basis for that stock in your sale of 75 shares, because you have to sell the oldest stock first.  If the older stock was a result of an RSU that was granted  2 years before your sale, your cost basis for this sale will be different. If there's anything that complicates your example above, I recommend you get a CPA to look it over.  

And you should record all your pertinent information:  Price of the stock at the close of vesting day, vesting date, award grant date award size, vesting size, and if non-zero, award cost.   If you go over a year, you're gonna need it.