RSU shares sold to cover taxes only - 2024 TurboTax prompts

[rena7]

I'm entering the RSU sales listed on my 1099-B form.  Because I'm not sure if the cost basis reported is actually correct, I decide to check the box that says "The cost basis is incorrect or missing on my 1099‑B". That leads me through a series of guided prompts. Then on the screen titled "Tell us about your RSU sale", the instructions say this:
"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."

In this particular transaction that was reported on my 1099-B, 17 total shares were vested/released and 9 shares were sold automatically to cover taxes, but I did not sell any shares myself. The online form won't allow me to enter 0 in the "Number of shares sold" box. So instead I try to enter the number that was sold for taxes, 9, which seems to be not following what the instructions said, but like I mentioned it won't let me enter 0. 

After that, I'm taken to a screen title "Let's get some purchase info about this RSU sale" where I enter the "Total shares vested/released" (17) and "Shares withheld (traded) to pay taxes" (9) and submit the form to continue. I'm getting error notices on the following pages indicating that I haven't entered enough shares, which makes sense because the system thinks I sold 8 shares (17 minus 9 = 8), but on the very first screen I had entered 9. 

Long story short, what is the correct way for me to fill out these prompts accurately? I don't want to get taxed on shares I haven't sold yet. 

[KrisD15]

To clarify, when you say 17 vested/released do you mean sold or vested? 

If only vested, the income those shares represent will be included as income on your W-2. They would not be reported on 1099-B.

If this is the case, the value included as income is the basis of the stock when you sell in the future. (also the value for the stock which was immediately sold) Often the employer will list the value in Box 14 on your W-2. 

If shares were sold immediately to cover the taxes on the vested shares, only the shares sold would be reported as income. 

[rena7]

17 shares were vested. 9 shares were sold immediately to cover taxes.

I have dozens of these lots over the course of the year that I'm going to have to enter. Most of them are like the situation above where I didn't take an action myself, but it was automated. There are a small handful of transactions where I actually did sell shares myself. All of the above will be mixed together into one number on my W2, so looking at my W2 isn't very clear or helpful, not to mention I also have NQSO sells that are probably also mixed into another area of the W2 as well.

You're right, the 8 remaining shares from the above lot, which were not automatically sold, are not included on my 1099-B. How do I ensure that I don't get taxed for the 9 shares that were sold automatically? If those are on the 1099-B, wouldn't the government assume that as stock sale income (when in reality it's not)?

Or back to my original question, how do I fill out the online TurboTax prompts correctly? I'm not a tax expert, so I like the "dummy guide" TurboTax question prompts, and I trust that TurboTax can sort this out accurately. But like I mentioned previously, it wasn't allowing me to answer "0" to the question of how many shares did I sell aside from the shares for taxes.

[DavidD66]

RSUs are pretty straight forward; therefore, I recommend you enter your transactions without indicating you are reporting the sale of company stock.  Indicating that it is company stock has no impact on what's reported to the IRS.  It only affects what screens and questions you get in the TurboTax interview.  In addition, for RSUs (all company stock) do not import the Form 1099-B; instead, enter the information manually.  When RSUs vest (the stock is delivered) the entire amount is ordinary income subject to income, social security, and Medicare tax withholding.  Your employer must collect payroll taxes, or sell shares to pay it.  Since you are taxed on the entire amount, your basis is the amount that is added to your W-2 which you are taxed on.  If you retain the stock, any gains on the sale will be short term if you hold the stock one year or less, and long term if you hold it more than one year.

Your cost basis is the total value on the date the RSUs vested.  This is also the amount that it is added to your income and included in Box 1 of your W-2.  To get your cost basis per share, divide the total value upon vesting (the amount added to your income) by the total number of shares represented by the RSUs.

When brokers report the sale of RSU stock, they usually report a cost basis of zero, or an amount that is not correct.  When you report a Form 1099-B with RSU stock sales, you have to enter an adjustment to the cost basis. 

You asked:

How do I ensure that I don't get taxed for the 9 shares that were sold automatically? If those are on the 1099-B, wouldn't the government assume that as stock sale income (when in reality it's not)?

You don't.  You will be taxed, as earned income, on the shares that were sold automatically.  There value was included in your income reported in box 1 of your W-2.  You want to make sure you don't get taxed twice.  In order to do that, you have to adjust the cost basis reported on the 1099-B to reflect the value on the date they vested.  It should be either the same as, or very close to the sales proceeds for those shares.  

If you have multiple sales from different RSU lots you will need a detail of your RSU activity that shows the value of the stock on the delivery date, as that amount determines your cost basis.  Brokers sometimes have a supplemental schedule included with the 1099 Composite package and/or year-end statement that shows the cost basis for the shares sold.  If your broker did not provide the information, you should be able to get it from your employer.  If you can't get the information from your broker or your employer, you can look up the historical stock price for the dates sold and use the closing price for the day.  It may be off slightly, but it will be close.   

Remember, for the stock sold to pay tax, those transactions should result in either very small gain or loss, or no gain or loss.   

[rena7]

I'm still trying to grasp all of what you said and I would argue that by no means is this straightforward. Having to jump through hoops to avoid "getting taxed twiced" is not simple/straightforward for ordinary people like me who are not tax experts. I appreciate the details you provided on how RSUs generally work, but my original question was: "how do I fill out the online TurboTax prompts correctly?" I haven't gotten an answer to that question yet.

You just said: "I recommend you enter your transactions without indicating you are reporting the sale of company stock." This sounds like a workaround and not how the product is supposed to be designed to be used. If this is the recommendation from TurboTax Support, can you please provide verbatim the exact Turbo Tax sections, prompts, and which answers I should select then? It may require a product support person to answer this question rather than a tax expert? I am entering the RSU sales manually. How do I fill out the prompts in such a way to avoid it noticing that it's a company stock sale? It would be great to get instructions that verbatim match the form questions in the product. Thanks

[ThomasM125 · Accepted solution]

You can identify the shares as company stock when you enter them in TurboTax. When you enter the Form 1099-B, you will be asked if you want TurboTax to help you calculate the correct cost basis or if you want to enter it on your own. Since you are having trouble with having TurboTax help you, it may be easier to calculate the cost basis of shares sold on your own and then enter that amount in.

Assuming you didn't pay anything for the restricted stock units (RSU's), which is typical, their cost per share is the amount listed on your W-2 as income from vesting divided by the number of shares vested. You can then multiply the cost per share by the number of shares sold, 9 in this case is seems, and that will give you the cost basis to enter for the sale amount reported on your Form 1099-B.