RSU Sell To Cover for 2019

[kameleon]

I'm confused about the RSU Sell To Cover interview in this year's Turbo Tax.

When I import my data from my broker, I have two distinct sales for a single vesting lot.  The first is a Sell to Cover sale to pay for taxes.

When I go to edit this sale, as I have done in the past, it begins to ask me a number of questions and one of the first I see states:

"Make sure you only enter the portion of the shares you sold. Your RSU sale will include a portion of shares sold and a portion of shares traded to pay for the taxes withheld. We'll ask about the shares traded for taxes later."

This doesn't make sense, as this is a Sell To Cover transaction, so all of the shares were traded for taxes.

What's the correct way to answer the interview questions both for this sale (Sell To Cover) and the other sale related to this vesting lot?

[DavidD66]

First of all, I recommend you manually enter any transactions involving Employer Stock.  Was this "Restricted Stock" or RSUs - Restricted Stock Units?  

[RobertG]

Did you receive a 1099?

If the only sales were share to cover, and you did not sell any of the shares received, you should not have to report it.

RSUs are taxed when they vest. Income is reported on the W-2 and shares are withheld to cover tax on the shares. Nothing else is reported on the tax return until the shares are sold.

A 1099-B is issued when the shares are sold. The basis of the shares is the market rate of the shares at the time of vesting that was reported as income on the W-2. When the sale is reported there will be a capital gain or loss.

[kameleon]

Thanks.   First, I did get a 1099 and it does include the Sell To Cover sales.  Secondly, when I import the data from the broker directly into TurboTax, those Sell To Cover sales are included in the import.

I also notice that the Sell To Cover sales include a gain or loss.  This is the capital gains observed between the time the shares are released and the time the shares are sold to cover taxes.  It's generally the same day, but not immediate.  

[kameleon]

This was RSUs

[DawnC · Accepted solution]

You are getting those questions because it is an RSU and TurboTax has changed the entry screens.  Since you imported the 1099-B, you are showing 2 separate transactions/sales.  Had you manually entered the transaction, TurboTax will essentially allow you to enter 'both' transactions/sales in the same entry.   The screen you see that on is not for the sale transaction, but only for the vesting details for that lot.   This is where your W-2 compensation is calculated from, specifically the Total Shares Vested/Released box.   

If you are going to report both sales from the import,  separate the vested shares you sold and held (assuming you did not sell all of your shares) from the withheld/traded shares in the Total Shares Vested/Released boxes for each transaction.  For the sale of the withheld shares, the Shares Traded for Taxes box will be the same number as the Released box.  For the other sale, the Shares Traded for Taxes box will be 0.   Be careful to get the totals correct here.  This is why David suggested manually entering the transaction instead of editing the import data. 😉

If you manually enter the 1099-B, you don't have to enter the sale of the withheld shares and instead combine the 2 by entering the number of shares withheld for taxes in the Shares Traded for Taxes box on the vesting screen.  You would enter the total amount of shares vested (sold, traded and held) on the Total Shares Vested/Released box.  In this case, you would only enter the sale of the shares that you received proceeds for (the other sale). 

The totals should come out the same, however.  But double-check that everything was reported correctly.   Make sure the compensation amount calculated in TurboTax matches what was reported on your W-2 (all shares vested in 2019).

The gain or loss (if any) from the withheld/traded shares should be minimal due to timing and/or any selling expense incurred.  If sold the same day, there is usually a small loss.

The gain/loss from the other sale (your vested shares sold) should = the difference between the market value per share at vesting and the sale price per share X the number of shares sold.   

[scooter123]

This is my first year with RSUs.  I have the same situation as kameleon, in that TurboTax asks: "Your RSU sale will have a portion of the shares reported as sold, and a portion that were traded to pay for the taxes withheld.  Enter only the portion of the shares you sold on your Form 1099-B.  We'll ask for the shares used for the taxes a few screens later".

But on my 1099, E*Trade broke out the shares I sold and the shares used for taxes into two separate lines.    It looks like the suggestion from two years ago is to just combine those into one transaction.  Is that still the advice this year?

For me, the two transactions were one day apart, so I'll have to just pick one day for the "Date of Sale", but it's all short-term, so I think it's ok.

[DavidD66]

The taxation of RSUs is pretty simple.  The value of the RSUs are taxable as ordinary income on the date they vest.  That value is included in Box 1 of your W-2 as wages, which required taxes be withheld.  In order to pay the withholding tax, Units are either sold or withheld. Those sales need to be reported on Form 8949 and Schedule D.  Your receipt of the RSUs is reported on your W-2, so you now need to report the sales of any shares, whether sold to pay the withholding tax or for other reasons. I would not use the step by step for employee stock section of the program to report this, rather report the two transactions that are on your 1099-B just as you would any other stock/investment sale. 

[scooter123]

DavidD66, thank you.  Not using the step-by-step for employee stock section seems like what I need to do.  When I use the step-by-step for employee stock, TurboTax seems to assume that the sell to cover shares were sold at the same price as what I was taxed at on my W2, and according to my E*Trade 1099 and my W2, that doesn't seem to be a valid assumption.  Thanks again.