I have RSU grant of 50 shares and 16 were sold to cover taxes. Remaining 34 I sold and now amount is appearing on my W-2 along with my annual salary. But there is no entry on my W-2 for 16 shares that were sold to cover taxes in tax section. Am i paying double taxes? First at time of vest and second time as it is added on W-2 caused higher tax bracket but no information of 16 shares that were vested to cover tax?
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ANSWER IS CORRECT FROM AN INCOME TAX STANDPOINT BUT STEP BY STEP INSTRUCTIONS ARE ONLY APPLICABLE TO THE 2015 PROGRAM AS THE DEVELOPERS CHANGE THE INTERVIEW FLOW EVERY SINGLE YEAR.
At this point you are being double taxed. But the issue is not that you have no place to report the 16 shares sold "for taxes."
The cash raised through the sale of shares "for taxes" is passed back to your employer, who pays the government, and then reports those taxes as "withholding" on the W-2. So the taxes have been reported, and you can't report them again.
The problem is that you are using the wrong basis for the sale.
Your basis in the 50 shares is: (per share fair market value used by your employer at vesting) x (50 shares) and that's exactly what has been reported to you on your W-2 as the "compensation." So if you don't use that basis then, yes, you're effectively reporting the income twice: once on the W-2 and then again as an overstatement of gain on sale. Your per-share basis is the same as the per-share "FMV" figure used by your employer.
Starting in 2014 brokers no longer had to report the "compensation" element of basis on the 1099-B, just the "out of pocket" basis. For an RSU that's typically $0. So you most likely need to report a basis for the sale of (34) x (per-share FMV used by the employer.)
Using the spreadsheet-like "fill in the boxes" default TurboTax 1099-B entry form, enter the 1099-B exactly as it reads. Tick the box next to "This sale involves an employee stock plan (including ESPP) or an uncommon situation." Click the blue "Start Now" button that shows up and then click the radio button next to "My 1099-B has info I know isn't right, or it has extra info I need to add." That will allow you to add the missing amount of basis and TurboTax will show all this correctly on Form 8949.
Tom Young
ANSWER IS CORRECT FROM AN INCOME TAX STANDPOINT BUT STEP BY STEP INSTRUCTIONS ARE ONLY APPLICABLE TO THE 2015 PROGRAM AS THE DEVELOPERS CHANGE THE INTERVIEW FLOW EVERY SINGLE YEAR.
At this point you are being double taxed. But the issue is not that you have no place to report the 16 shares sold "for taxes."
The cash raised through the sale of shares "for taxes" is passed back to your employer, who pays the government, and then reports those taxes as "withholding" on the W-2. So the taxes have been reported, and you can't report them again.
The problem is that you are using the wrong basis for the sale.
Your basis in the 50 shares is: (per share fair market value used by your employer at vesting) x (50 shares) and that's exactly what has been reported to you on your W-2 as the "compensation." So if you don't use that basis then, yes, you're effectively reporting the income twice: once on the W-2 and then again as an overstatement of gain on sale. Your per-share basis is the same as the per-share "FMV" figure used by your employer.
Starting in 2014 brokers no longer had to report the "compensation" element of basis on the 1099-B, just the "out of pocket" basis. For an RSU that's typically $0. So you most likely need to report a basis for the sale of (34) x (per-share FMV used by the employer.)
Using the spreadsheet-like "fill in the boxes" default TurboTax 1099-B entry form, enter the 1099-B exactly as it reads. Tick the box next to "This sale involves an employee stock plan (including ESPP) or an uncommon situation." Click the blue "Start Now" button that shows up and then click the radio button next to "My 1099-B has info I know isn't right, or it has extra info I need to add." That will allow you to add the missing amount of basis and TurboTax will show all this correctly on Form 8949.
Tom Young
The only thought I have is that you didn't do EXACTLY what I suggested that you do. That is, my thought is that you DIDN'T follow the path of simply correcting the basis from the $0 reported by the broker to 160 for the first trade and 340 for the second trade if your tax liability went up a "crazy amount." My guess would be that instead of simply correcting the basis you, instead, went into the RSU step by step interview, and did something wrong like, maybe, telling TurboTax about the SAME LOT VESTING twice, once for the sale of stock "for taxes" and then again for the sale of stock "for cash" and then telling TurboTax "No" when TurboTax came back with its own calculation of compensation created by the vesting and asked if this was the amount reported on the W-2. Of course that's just a guess as you've based your judgement on the "correctness" of the entry by focusing on the "Refund -O-Meter" instead of looking at WHAT CHANGED in your actual income tax return.
DELETE those trades.
Enter them exactly as they read off the 1099-B, bad basis and all.
Tick the box next to "This sale involves an employee stock plan (including ESPP) or an uncommon situation."
Click the radio button next to "My 1099-B has info I know isn't right, or it has extra info I need to add."
Tick the box next to "The Form 1099-B shows an incorrect cost basis."
On the page "Correcting Cost Basis from Form 1099-B" enter the correct basis in the box "Adjusted Cost Basis (if applicable)." For the first trade you'd type in "160" and on the second trade you'd type in "340".
That will add the missing amount of basis and TurboTax will show all this correctly on Form 8949.
I have a slightly different situation... my paystub shows the sale to cover taxes for my RSUs in additional deductions as Incentive Taxes and that tax is not included in my W2. I only got a 1099-B from my broker where I sold them, but not one from the RSU management company where the sale to cover happened. I used the vested grant basis after sale to cover for my cost basis for the broker 1099-B. Am I not able to show the significant tax already paid on the RSU income since it's not included in my W2? or is my W2 wrong?
I have a similar question for filing 2016 Taxes.
@TomYoung: Can you please confirm if the steps are same or update them for 2016?
I have a similar question for filing 2016 Taxes.
@TomYoung: Can you please confirm if the steps are same or update them for 2016?
I have a similar situation for 2015 taxes and would like to clarify it.
My RSUs were vested in 2015 and part of them was used to cover for taxes.
I got W-2 which shows all. Now when I use Turbo Tax I electronically download W-2 from my employer and aslo 1099-b from the brokerage that manages RSUs, and after the brokerage download my tax liability doubles.
Any suggestions?
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