How to report RSU that were sold to cover taxes? I have done extensive research and I see multiple options on turbotax to do this each leading to different tax due amount

[jkshar2005]

My broker reports RSU transactions that were sold to cover taxes to IRS on 1099b (under box B) with cost basis 0 

Now shall I show all these transactions used to witheld taxes on turbotax along with actual transactions that I did?

If yes, do I need to use the uncommon situation button and tell it that:

This Form 1099-B shows the Federal or State income taxes were withheld from the proceeds of this sale

and

The Form 1099-B shows an incorrect cost basis.

OR 

I do not add these transactions and then while I am adding my actual transactions I use the option "I have sales from an Employee Stock Plan, including ESPP, NQSO, ISO, RS, and RSU"  and then in interview process use "Shares Withheld (Traded) to Pay Taxes" to provide the RSU that were sold to cover taxes.

If I am using the second option the wages are matching my W2 but then I don't get the option to tell the value at which these sell-to-cover-tax RSUs were sold ? As the form where I enter "Shares Withheld (Traded) to Pay Taxes" only has option to enter market value when the shares vested.

[TomYoung · Accepted solution]

If the 1099-B reports the sale of shares that were for taxes then you need to report that sale.  The cash from the sale of shares sold "for taxes" was passed back to your employer, who paid the government, and included those amounts in the "taxes withheld" boxes of the W-2.

Since it's a Box B sale - basis not reported to the IRS - you simply enter the correct basis as you enter the sale in the spreadsheet-like, "fill in the boxes" default TurboTax entry form.  Press "Continue" when you've entered the 5 pieces on information.  You are done.

(I'm assuming, of course, that you DO KNOW your correct basis for the shares sold.)

Tom Young.

[jkshar2005]

1099b does not mention that sale of shares is "for taxes" it just shows the transaction which my employer did to cover the taxes. But when do we use the uncommon details option and then again the "Shares Withheld (Traded) to Pay Taxes" box in uncommon details area ?

[TomYoung]

"1099b does not mention that sale of shares is 'for taxes' it just shows the transaction which my employer did to cover the taxes."

I didn't say the 1099-B would have a notation of "sale of shares for taxes."  In all respects it's just a regular 1099-B reporting your sale of stock.  Accordingly, it has to be entered in the income tax return.

Understand that share number entered in the box "Shares Withheld (Traded) to Pay Taxes" has only one effect.  It subtracts from the box above it - shares vested - to determine the number of shares available for sale.

The only way you can use the RSU step by step process - which is where you are are at when you see that "Shares Withheld (Traded) to Pay Taxes" box - is to report the shares sold for taxes as the number of shares vested, and leave the "Shares Withheld (Traded) to Pay Taxes" box empty.  But that can create its own problem for you because TurboTax calculates its compensation, just like your employer, on the gross number of shares VESTED, not sold.  So you have to make sure that you report at least one other sale - maybe even a 0 share sale, such that the number of shares vested reported to TurboTax equals the actual vesting.

There is no "income tax reporting" reason to use the RSU step by step interview except in two cases:

1) You don't know the basis for the shares sold or,
2) The employer didn't report the compensation income on your W-2.

[erikabauer22]

this is really confusing. easy to get this wrong. i had IRS send me a CP2000 since they still think the 1099 reported for the sale to cover taxes was income and turbo tax had no way to flag that in 2016.

[isaiahcooper]

I have the same issue where the sold RSUs to pay for taxes was somehow reported on 1099, even though I don't see the 1099 on my Schwab account.  Did anyone who had this issue just mail in the CP2000 with the document showing that the RSUs were actually sold to cover taxes?

[rtbtxxiao11]

Turbo Tax is so confused about RSU.  I have discussed with several people who also agreed.  Assuming vested RSU is 100 shares, 40 of 100 shares were withheld for tax.  Also assuming $15 per share is the market fair value on vested date.   Therefore the  total proceeds is 100x$15=$1500.  This has been reflected as income in W2.  Following step by step on Turbo Tax, the cost base is 60x$15 = $900  the short gain = 1500-$900 =$600.   Is his right?  If so, final check has error since it requires additional lot about 60 share.  

[TomYoung]

@rtbtxxiao11 

You are wrong here. 

"Assuming vested RSU is 100 shares, 40 of 100 shares were withheld for tax. Also assuming $15 per share is the market fair value on vested date. Therefore the total proceeds is 100x$15=$1500."

The vesting creates $1,500 of compensation, not $1,500 of  proceeds from a security sale. 

If you sell all the stock on the same day as the vesting then something close to that $1,500, (net of broker fees) could also be proceeds ,but you are talking about two completely distinct activities here.

1. Vesting creates compensation
2. Selling stock (at any time) creates proceeds, (and gain or loss)

I'm guessing that you have a "same day" sale here, (or maybe two "same day" sales, one the the stock sold "for taxes" and one for the remainder of the stock you decided to sell "for cash"), and you've gotten tangled up in the RSU "guided" interview for the sale(s).  But same day sales typically create a small loss due to selling commissions and fees.

Here is how to get out of this mess.

1. Delete the trade(s) that you've entered.  Don't attempt to edit or modify them.
2. Enter the trade(s) using the non-guided basic "1099-B" entry form exactly as the 1099-B(s) received from the broker reads.
3. Then use the mechanism available in TurboTax to "correct" the basis from the $0 shown on the broker's 1099-B to the correct cost basis of $15 per share.

For step 3., in the desktop versions of TurboTax you'd click the blue "I'll enter additional info on my own" button below the 1099-B entry form and on the new page that that comes up enter the correct basis in the "Corrected basis" box.  I assume the online version has something similar.

[lokidoki]

@isaiahcooper  did you get this figured out last year? I just ran into the same exact problem this year. 

[gulsheenk]

I had the same issue with my  form from Fidelity and the office staff clarified to use page #5 of the form that has Adjusted Cost or Other Basis, so that worked in Turbo Tax as well.

However, next screen in Turbotax asks "Was this a sale of employee stocks"? By definition, employee stocks include RSU plan. Selecting Yes, prompts me to enter all information (Number of stocks vested, market price on vesting date (per share), Price you paid (per share),  etc. ).  Wondering if I need to include all this information considering these stocks were sold to pay taxes and compensation income is already included in W2?

Thanks,

Gulsheen

[AK64]

Facing the same issue here.  Were you able to figure this out?

[DavidD66]

You do not need to go through the Employer Stock questions if you know the cost basis of your Restricted Stock Units and the value was reported in Box 1 of your W-2 and taxes withheld.  Report as two separate transaction - one for shares sold to cover taxes, if applicable, and one for the other shares.

If you received a stock award (e.g. Resricted Stock, or RSUs), tax is assessed on the value of the stock on the day the stock vests/ is delivered.  That amount is ordinary income, and is included in Wages on Box 1 of your W-2 for that year.  Your cost basis is also the value of the stock on the day it vests or is delivered.  The problem is, brokers don't have (or don't report) that information.  If you know the amount that was added to your income, that is your actual cost basis.  In order to keep from paying tax on the stock award twice, you have to correct your cost basis.  To do so, go to that 1099-B transaction, and on the page with the Description, Date Acquired, Date of Sale, Sales Price, and Adjusted Cost or Other Basis, click on "I'll enter additional info on my own".  On the next page, enter the "Corrected cost basis"

[gulsheenk]

Thanks, DavidD66, for your response.  I have adjusted cost basis in the form from Fidelity and are short term covered transactions (confirmed by Fidelity).

So what should I select from the next screen "Was this a sale of employee stock"?

Sales from employee stock plans, including ESPP, NQSO, ISO, RS and RSU plans often require special handling.

Option 1:  Yes, this is stock that was acquired through an employee stock plan

Option 2:  No, this is not employee stock

<does not have third option that it does not apply to me>

Selection option 1, takes me through screens that computes total proceeds , Market price on vesting date, price you paid per share, purchase commissions or fees paid. 

Why do I need to enter all this information when my RSU data is already included in my W2 and I have my cost basis?

Thanks,

Gulsheen

[fanfare]

Tom Young knows what he's talking about but has given up answering this question a hundred times.

[AK64]

i did look at all his replies however some things are still not clear.  I am not importing 1099-B but entering it manually.  I did not sell any RSUs outside of what were withheld for tax purposes, and my 1099-B has correct cost basis.  However, after I am done entering 1099-B, it does ask whether these are sale of employee stock, and I assume the answer is "Yes" as these are from RSUs.  If you keep following the prompts you do have to enter all the information from the statement.  I don't see how you get away with just entering 1099-B info and not the rest of the stuff about vested shared, # sold for taxes etc.