RSU Cost Basis Quandary

[dxbo_cs]

In the past when I've had Turbotax upload my 1099-B it will input my RSUs as having a cost basis of zero which is expected.  However, this year after I've gone back and manually entered my cost basis in box 1e it doesn't change the taxes I owe.  Prior to making the change to box 1e Turbotax considers my all RSUs as taxable gains so when I enter the cost basis I'd expect my taxes owed to go down but it didn't at all this year.  I should also mention when my RSUs vest they withhold shares to cover taxes.  Any ideas why I'm not seeing my taxes owned go down?

Thanks in advance.

Dan

[RaifH · Accepted solution]

I can think of three reasons this might be. Reason one is that you have enough capital losses to offset all your capital gains, even if your RSUs are being calculated entirely as a gain. If this were the case, correcting the basis would still be beneficial as it would allow you to carry forward more capital losses. 

Reason two is that the import already adjusted your basis somewhere and you just missed it, so the gain from the sale is already 0 or minimal.

Reason three is that when you attempted to adjust the basis, something went wrong and the gain is still being reported. To adjust the basis on your RSU sales in TurboTax:

1. In the Federal > Income & Expenses > Investment Income section of your return, click Start/Revisit next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
2. Answer Yes and then select stocks. Import or enter your transactions manually. 
3. For the RSU transactions, make sure to select Yes to Do these sales include any employee stock?
4. Enter the transactions as they appear on the 1099-B with RSU selected as the type of investment.
5. If the basis reported on the 1099-B is not correct, you will be able to adjust it to match the supplemental information provided on the next screen, Enter your cost basis to ensure your best outcome. If you have the basis for the sold stocks, you can enter it under I found my cost basis. Otherwise, select I can't find it and need help and TurboTax will determine the basis using your brokerage information.

Ok, I'll give you a bonus fourth reason that doesn't seem too likely. You are beneath the taxable threshold or have enough deductions and nonrefundable credits so the gains are not generating any income tax. Your taxes due may be from self-employment.  

[dxbo_cs]

Thanks a bunch!  This was very helpful.

Dan

[hctamburini]

Thanks for all the information about RSU, a topic I found particularly complex and have been reading lots of postings on the subject.
In my case, I received RSU from my employer and the broker/employer sold some of the RSUs to pay taxes which were withheld. I didn't receive cash for the sale of the shares, however they are reported as 'Quantity Sold' in the 1099-B. Following the advice in multiple postings, I entered the quantity sold in the corresponding screen, and also the quantity withheld for paying taxes (they are the same!!), as well as the $ amounts paid in federal and state taxes. The one thing I did not come across is the option of correcting the cost basis, which was automatically calculated by TurboTax Premier, and it 'almost' matched (a minor difference) the Adjusted cost basis provided by the broker.
With all that, in my case this will result in a tax refund to me both from federal and state tax, which is too good to be true.  Before I e-file, I'd like to make sure this is not due to an error, but instead it's because the $ amount withheld was calculated based on the total amount of income and a cost basis of almost 0, and not the adjusted cost basis.
Could someone please confirm if this is a fair assessment?  Thanks much in advance!

[DianeW777]

This is a fair assessment.  The cost basis for shares vested and sold the same year will be very close to, if not equal to, the selling price which creates a low to none capital gain.  The reason is because the fair market value (FMV) on the vested date will be virtually the same as the selling price of those shares.  

The company actually sold it for you so that the taxes could be paid.  When the shares are vested there is additional tax created by adding the value of vested shares to your income on your W-2. The taxes paid become part of your federal and state tax withholding.

[hctamburini]

Thanks very much DianeW777!

[just curious]

same experience here. in the past entering the basis reduces the tax obligation. this year - no. When reviewing the #s it appears the basis is captured correctly, but it's perplexing how TT set the tax owed correctly without my manual entry of the basis details. not sleeping well as a result..

[GeorgeM777]

You may need to complete the Investment Income subcategory completely before TurboTax will update your tax liability.  You might also want to review your tax summary to get an idea of your taxable income and tax liability.  If you are using TurboTax online, to view your tax summary, follow these steps:

1. Open or continue your return.
2. Select Tax Tools in the left menu (if you don't see this, select the menu icon in the upper-left corner).
3. With the Tax Tools menu open;
4. Select Tools.
5. Next, select View Tax Summary in the pop-up.

@just curious

[Marc777]

Thank RaifH, excellent response!  I have a slightly different problem, wanted to keep on a 2022 forum topic, as product behavior keeps changing. This is related & I dont know how to create a new topic so: 

I was able to enter in the cost basis no prob (thank you Intuit!), but saw if the cost basis is greater than proceeds, in guided entry it pushes the cost basis back down to the same as proceeds.  ...Maybe workaround by entering into the form directly?  Nope, later during the "federal check" I came up with an error for each sale where the cost basis was higher than the proceeds.  As you know that can be typical for immediate sell-to-cover, due to commissions / transaction fees -- this rationale for slightly higher cost basis is even in the turbotax help screens!  (I guess the developers don't talk with the doc team enough.)  It's not a huge amount of course, so I can just make the cost basis = sale price, but it is annoying to pay extra to end up with this kind of sloppiness.    

---

Non sequitur: I was more seriously annoyed the time wastage due to the fact that even though you MUST enter the "cost basis" ( since it is often incorrect in the 1099), and even though you must enter or confirm the proceeds (which is in the W2), you MUST NOT enter the "tax withheld" (which is also in the W2).  NOT intuitive (pun intended)!  So after making sure I did not double-count my gains (of course), I saw my "tax due" status was seeming too low, and after poring over the forms, realized I ended up double-counting my RSU withholding!  ...But only the RSU's (not other instruments).  It really would not be too much trouble for them to just have a checkbox that says "These withholdings are in my W2", you know, to make it unambiguous & prevent double-counting -- but simplifying seems to be a secondary goal with Intuit.    (This year I had to examine the schedule D & worksheets in detail to find the problem.  Sheesh I could have done the whole thing quicker by hand.)  Had to just send off my estimate with an extension b/c it was just too messy to do in time.   (Yes I should have started earlier!)

>> OK that is the end of my rant, thanks for listening!  <<