Sale of stock options to cover tax

[s3g2o1t0s]

I was awarded some company stock in 2019 for which I was given two options:

1. Selling outright
2. Selling a portion to cover my tax liability and then depositing the balance into a vested share account.

I chose the second option. The record I have shows a total of 311 shares being transacted from which 106 shares were sold to cover my tax liability, with the remaining 205 shares being placed into the vested share account. I received a form 1099-B reflecting only the proceeds from the sale of the 106 shares. What is the best way to enter this?

[KurtL1]

You would only enter the shares sold in your return. On the 1099-B the cost basis only included the market value of the stock on the date you sold the stock, 

On you W-2 you had an amount added to your wages of for value of the 311 shares. You need to add to the cost basis the proportionate value of the 106 shares sold. The cost basis on your return should almost be equal to the proceeds plus the fees charged by the investment company. You should be showing a loss on the sale.

You might have received supplements documents that will also provide the cost basis to enter on your return.

If you need additional help see What is TurboTax Live? - Community for live help that can look at your documents (including W-2) to get you an accurate cost basis.

[NCperson]

I would not do ANYTHING.  The transaction for the 106 shares is already in your W-2.  You received no cash for this but your wages should reflect the income and the fed, state, social security and medicare taxes should all be higher as the offset 

[s3g2o1t0s]

That's what I was thinking as well but I still have a 1099-B reflecting the sale of the 106 shares. This would have been sent to the IRS, so won't that be a problem?

[Rick19744 · Accepted solution]

@NCperson response is incorrect.  You received a 1099-B, and as such, need to do something or you will receive a matching notice and will not have properly reported your income.

Yes, the value of the stock was included in your W-2 as was noted by @KurtL1 .  This income becomes your basis in the 311 shares of stock.

You sold some of the stock to cover the tax; as you noted.  Essentially you received this cash and turned it over to the fed and state (if applicable) for taxes.

As was noted by @KurtL1 , you need to report the proceeds from the 1099-B on form 8949 and Sch D.  What you also need to report is your basis in the stock that was sold.  Example: if you received 311 and $20,000 was included in your W-2 for that value, you have a basis of $64.31 for each share.  So your basis in the 106 shares sold is $6,817.  There were probably some broker fees that were charged, so those will be added to your basis as well.  As a result of this, you should most likely have minimal gain and most likely a small loss.

But the bottom line, is this DOES need to be reported.

[s3g2o1t0s]

Thank you @Rick19744 this really makes much more sense now! Following your method I determined that my cost basis was $18.45 more than what was shown on the 1099-B but then I also paid a broker fee of $18.23. So together it appears that I need to report a loss of $36.68. I'm going to check out that link that @KurtL1 provided, hopefully someone can double check us.

[Rick19744]

You are welcome.