I got RSU's after deducting taxes. Total income on my W-2 shows base salary+RSU. Importing 1099's from Fidelity, TT is taxing me again. I havent sold any of my shares

[harshiljhaveri89]

I received RSU's after deducting taxes from my employer in 2018. Total income on my W-2 shows base salary+RSU income. Importing 1099's from Fidelity directly into TT, it appears it is taxing me again on the income I generated from the RSU's. The 1099 from Fidelity shows the Cost basis for all the RSU's as 0, which is understood. How do I specify in Turbo Tax that the income from RSU's has already been taxed before. I havent sold any of my shares yet.

[TomYoung]

"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

[harshiljhaveri89]

Thanks @TomYoung .
There is a Supplemental Stock Plan Lot Detail Form in the 1099-B that I received from Fidelity, that has the following columns:

Grant Type (w)
Quantity
Date of Acquisition (x)
Date Sold or Disposed
Proceeds
Ordinary Income Reported (y)
Adjusted Cost or Other Basis (z)
Wash Sale Loss Disallowed
Adjusted Gain/Loss

I see 5 line items (for the past quarters) for each of these columns which shows the amount of shares I received (Quantity), Proceeds (Income I received from each transaction) and Adjusted Gain/Loss.

From tallying the numbers,
Adjusted Gain/Loss = Adjusted Cost or Other Basis (z) - Proceeds  
In some cases, the Wash Sale Loss Disallowed = -(Adjusted Gain/Loss)

Are you suggesting I use the numbers from the Adjusted Cost or Other Basis (z) column into Turbo Tax?

I did try doing what you've mentioned above for one of the line items and what TT does is, shows the following:

Gross Proceeds: Proceeds
Gain/(Loss): 0

Is that correct?

[TomYoung]

Seems correct.  Typically same day sale show a small loss due to selling commissions and fees, but a small gain is also possible if the selling price is higher than the FMV price used for the basis.  If the selling price is the same as the FMV cost and there are no fees involved then $0 certainly is possible.

[harshiljhaveri89]

@TomYoung I never sold my stock. Fidelity sold stock on my behalf for paying taxes on it. And from my Fidelity Statements, it looks like the 1099-B is showing all the stock that I sold to pay tax. I havent sold any of the stock that I actually own post taxes. In that case, should I be using the Adjusted/Corrected Cost Basis?

[TomYoung]

"I never sold my stock. Fidelity sold stock on my behalf for paying taxes on it."

ALL of the stock was legally yours the minute they vested.  If you had reached into your own pocket and said "here's the cash for the taxes" then you'd still own all the stock.  You consented - maybe without understanding - to selling enough stock "for taxes".  Fidelity may have executed the trade but YOU sold the stock.

"I havent sold any of the stock that I actually own post taxes. In that case, should I be using the Adjusted/Corrected Cost Basis?"

It's entirely irrelevant if you sold some of the stock - for taxes or otherwise - or none of the stock.  The point you need to understand here is the taxes needed to be paid at the vesting because you recognized COMPENSATION.  Those taxes have absolutely nothing to do - nada, zip - with a subsequent sale of the stock.  That's a COMPLETELY SEPARATE EVENT!  The only connection the sale of the stock has to the compensation event is that the per share basis is the SAME AS THE PER SHARE FMV USED BY THE EMPLOYER TO CALCULATE THE COMPENSATION.  You need to understand that.

I can't see whatever the broker is telling you on the supplemental information but if they are using a per share dollar figure for the cost basis that's the same as the figure used to calculate the compensation, then yes, that's what you use.

[harshiljhaveri89]

@TomYoung Thanks for the detailed explanation. I fully understand it. Appreciate your time on this.

[Anonymous]

Hi Tom,

Thanks in advance for your time.

I can enter the adjusted cost basis and get net proceeds and net gains to match the supplement provided by E-trade down to the penny.  However, turbotax is computing a much higher compensation income. I’m sure its included in Box1. 

Does the Turbo tax calculated compensation amount matter?

[TomYoung]

@Anonymous 

Since you state that TurboTax is calculating compensation I know that you've used the RSU step by step interview, and I know that you've entered something incorrectly.

Understand that there's no real "income tax return reporting" reason to use that interview.  There really are only 2 legitimate reasons the use that interview:

1. Somehow the compensation associated with the vesting wasn't reported on the W-2, or
2. You don't have a clue as to what the proper basis for the stock is and need TurboTax's help to come up with a reasonable estimate.

I take it that neither reason pertains to you. 

What you're selling here is plain-vanilla "stock", really not a bit different than a stock you might have purchased through your broker, and that's the easier and less mistake-prone approach.  You enter the 1099-B exactly as it reads, wrong basis and all, and then correct the basis using TurboTax's correction mechanism to get the Form 8949 to reflect everything properly.

Accordingly, I generally recommend NOT using that interview because it can be confusing and people frequently make mistakes.  If you use the RSU interview TurboTax uses the exact same method that your employer uses to calculate the compensation - GROSS shares x a per share FMV figure - so you've overstated the gross number of shares vesting, probably because you've told TT about the same vesting twice, and TT isn't smart enough to figure that out.

I'd say delete the trade or trades you've entered using the RSU interview and simply report the trade as a regular stock sale, correcting the broker-reported incorrect basis.

[rahulkb88]

Hey @harshiljhaveri89 , This is 3 years when you posted this, but I am facing the same issue. May I know what you did? In my case Etrade has reported all the RSU sold to pay taxes as Realized gain on which I am having to pay taxes. 
Your response will be very much appreciated. Thank you.

[MarilynG1]

Did you receive a 1099-B?  If not, the Realized Gains on shares sold for taxes are reported to you employer (to be added to your W-2), so you don't need to enter this info in TurboTax.

If you did receive a 1099-B, when you entered it did you enter the correct Cost Basis?  The 1099-B often shows $0 Cost Basis, as the broker may not know what the FMV of the shares were when you vested.

If this applies, go back to your 1099-B entry and indicate 'cost basis is incorrect' then enter the correct Cost Basis. 

When you enter your 1099-B you can say NO to 'employee stock' if you know your cost basis, and you won't need to go through the exercise in TurboTax of calculating your vesting income.

Click this link for more info on How to Enter 1099-B.