How to report RSU sell to cover if have not sold any RSUs myself?

[fabio-vfm]

e-trade shows cost basis as zero; and for the love of everything that is sacred where do I find the "sale category" per transaction as asked by TT? it is nowhere to be found in the 1099B per transaction report.

[TomYoung]

A sell to cover trade has to be short term and if the 1099-B tells you that basis is being reported to the IRS then it's a Category A trade. 

What you need to do here is to enter the 1099-B exactly as it reads and then 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.)

Your per share basis for a lot is:

         (Compensation reported to you for the vesting) divided by (GROSS number of share that vested)

Typically a "same day" sale, which a "sell to cover" sale is, will result in a small loss due to selling commissions and fees.

Tom Young

(SINCE THE DEVELOPERS CHANGE THE SECURITY SALE INTERVIEW EVERY SINGLE YEAR I'LL NOTE THAT THIS ANSWER'S DIRECTIONS ON HOW TO CORRECT THE BASIS FOR THE SALE PERTAINS TO THE 2016 INCOME TAX YEAR.  I'M SURE THAT THE INTERVIEW WILL CHANGE IN THE YEARS AFTER THAT.)

[yyu8550]

Hi @TomYoung - If I entered the cost basis based on what's reported on my 1099-B, do I still need to click on the "I'll enter additional info on my own" button to enter the "corrected cost basis"?  Is the cost basis that's reported on my 1099-B not the correct cost basis?
  
If I do have to calculate the correct cost basis myself, how should I determine the per share basis for each lot? I have multiple lots of RSUs with different numbers of shares that vested at different times, which means the compensation of each lot would be different. However, the W-2 only reports the RSU compensation as a lump sum for the year (in box 14). Can I just pro-rate the RSU compensation amount for each lot?

[TomYoung]

"Is the cost basis that's reported on my 1099-B not the correct cost basis?"

I have no idea, of course, since I know nothing about the trade.  The original poster mentioned "RSU" and "zero" cost basis and that was very clear.

"how should I determine the per share basis for each lot?"

The per share calculation is: (compensation created by the vesting) divided by (GROSS shares that vested)

I would be surprised if your employer didn't give that level of detail since you DO need it.  You didn't say that the basis reported by the broker was $0 so if they have put some number in the basis box they might have reported to you with the correct basis.

You can always use the stock's closing price on the vesting date as a pretty close approximation of what the employer used as the per share "fair market value".  So if the 1099-B does have a figure for the basis and you know the number of shares sold from each lot and each lot's vesting date you can test that out yourself.

[yyu8550]

Hi @TomYoung - Thanks for the quick response! I took another look at my W-2, 1099-B, and brokerage transaction history. I confirmed that my W-2 only reports a single amount for RSU in box 14. My 1099-B reports a cost basis for each transaction, but I wanted to be sure that this is the 'correct cost basis'. To verify this, I checked my brokerage transaction history and found the transactions in question. For each transaction, the brokerage reported a 'Fair Market Value (FMV) Per Share'. When I multiply this FMV by the number of shares sold to cover the tax, it matches the cost basis that was reported on the 1099-B.  To be sure that this FMV is the same as the 'per share basis' that you mentioned, I multiplied the FMV by the total number of shares released for each vesting and summed across all of the RSU vests in 2016. This amount matched the RSU lump-sum compensation amount reported on my W-2. So it looks like the 1099-B was reporting the correct cost basis after all. It's curious that TurboTax didn't bring in this number for some reason when I imported the 1099-B.

FYI...I found that the closing price on the vesting date was significantly different from the FMV used to calculate the cost basis and compensation.

[TomYoung]

"So it looks like the 1099-B was reporting the correct cost basis after all. It's curious that TurboTax didn't bring in this number for some reason when I imported the 1099-B."

That would depend entirely on how the broker set up the import file; it's not necessarily a mirror image of the paper copy.  If the basis really is in Box 1e of the paper 1099-B you might look closely at the 1099-B to see if that basis is really being reported to the IRS, or simply to "you."  I would guess the latter since the imported version had $0 in that box, which is all that the broker is required to report.

"FYI...I found that the closing price on the vesting date was significantly different from the FMV used to calculate the cost basis and compensation."

Not sure what "significant" means in terms of dollars here.  If the stock happens to vest on a day when the stock price fluctuated wildly the closing price certainly could be quite a bit different than the "fair market value" used by the employer.  I would expect that number to be somewhere in that day's High-Low range, however.