Capital Gain Wks (32 shares ARISTA NETWORKS INC COM) -- Employer Stock Worksheet: Line 25. Column (b)-2 should be entered.

[kennybagodonuts]

Git the above output at the end of my return about sale of restricted stock.

[TomYoung · Accepted solution]

I expect that it's telling you that you haven't reported enough "shares available for sale" for the number of shares you actually sold.  That's usually the result of having multiple sales out of a lot, (e.g., reporting both the sale of shares "for taxes" and the sale of shares "for cash"), and including in your input on the "Enter Vesting (or Release) Information" page a number in the "Shares Withheld (Traded) to Pay Taxes" box.  The only thing entering a number in that "for taxes" box does is that number is subtracted from the number of shares you reported as vested to come to a "shares available for sale" figure.

So, for example you reported the sale of 10 shares for taxes and entered 10 shares vested and 10 shares were sold for taxes you'd end up with 0 shares available for sale.

Try going back through the RSU step by step interview and blanking out any numbers in the "for taxes" boxes and see if that fixes things.

Tom Young

[myttaxid03]

My 1099B reports RSU lots that are solely sold for the taxes. As your example, I entered N shares for vested and the same N shares for taxes, and I got the same "Line 25. Column (b)-2 should be entered". How should I go around this "error"? Thanks!

[TomYoung]

You've read my answer incorrectly.  Entering N shares vesting and N shares sold for taxes results in NO SHARES available for sale.  For each entry TurboTax subtracts the shares sold "for taxes" from the shares "vested" to come up with the number of shares available for sale.  N - N = 0.

I generally advise that people NOT use the RSU step by step wizard because most people don't understand how it works and get confused.  If you want to use the RSU step by step and you're reporting sales of shares acquired via "this year's" vesting then you must report the FULL amount that actually vested because that's how TurboTax calculates the compensation that should have been reported on your W-2.  But if you had a lot vest "this year" and had multiple sales of stock out of that lot "this year" if you enter the full amount that actually vested with each sale then TurboTax would see that series of entries as MULTIPLE vestings during the year and OVER CALCULATE the compensation.

Confused?  That's why I say use the default (non-step-by-step) method for reporting the sales of stock acquired via RSU's and correct the basis reported by the broker.

[myttaxid03]

Thanks for your comments.

I understood on the "N - N = 0" part, however, I had to do something like this to match the 1099B entries, as generated by my brokerage there are two kinds:
* disposition-lot entries that are entirely for the tax purposes only (let's call these N)
* disposition-lot entries for the cash (let's call these M-N, where M is the original vest size)
I cannot merge entries from the same vested lot, with M vested, and N sold for tax, since I will have
less number of entries compared to the 1099B reported to the IRS already.

I have another 1099B that reported differently, where I could report the M and N numbers within the
same 1099B entry. TurboTax worked perfectly for this 1099B.

Please advise on how to report the unusual1099B... thanks!

[TomYoung]

Don't worry for one second about having reported less individual sales than reported by the 1099-B.  The IRS's "matching" process certainly doesn't work on a line item by line item basis.  If you report your sales correctly, even if you break one sale into 10 trades, (e.g., you're reporting each and every lot that went into the trade), the IRS simply can lay a glove on you.  Reporting your income correctly pretty much makes you bullet-proof, no matter how the detail is entered into the income tax return.

If you've just got to use the RSU step by step interview for some reason then report the 2 sales as:

Vested: M-N
Sold for taxes:0
Shares sold: M-N

and

Vested: N
Sold for taxes:0
Shares sold: N

That gets your "vested" number correct (M-N+N=M) and your shares sold correct, (ditto).

[myttaxid03]

Thank you for your response.

I entered the M-N entries exactly as you wrote:
     vested:M-N, sold-for-taxes:0 -> sold-for-cash:M-N

The problem is with the N entries, where I entered:
     vested:N, sold-for-taxes:N -> sold-for-cash:0
This triggers the "Line 25. Column (b)-2 should be entered" SmartCheck error.

Two questions:
1. If I were to report the N entries as you wrote,
wouldn't that let TurboTax miss the amount of taxes withheld already,
and TurboTax will end up having me pay double tax on those transactions?

2. If I'm not mistaken, you seem to suggest reporting the correct transactions,
and I could only do that by merging the 1099B entries such that I will have
these entries:
   vested:M, sold-for-taxes:N -> sold-for-cash:M-N
That I won't get chasen down even that the number of entries are less than
the reported 1099B? Is this what you suggest?

Thanks again...

[TomYoung]

"The problem is with the N entries, where I entered:
     vested:N, sold-for-taxes:N -> sold-for-cash:0
This triggers the "Line 25. Column (b)-2 should be entered" SmartCheck error."

Go back and read what I wrote.  You didn't enter it exactly as I wrote it.

The ABSOLUTE ONLY THING THAT ENTERING A NUMBER IN THE "SOLD FOR TAXES" BOX DOES IS REDUCE THE NUMBER OF SHARES AVAILABLE FOR SALE.  N - N = 0!  Entering a number in this box does not give you any "credit" for taxes withheld.  That's ALREADY ON YOUR W-2!

[myttaxid03]

Great. Your two statements are the bottomline answers.

The subsequent questions after entering the 1099B information threw me off,
i.e. those that ask whether the calculated ordinary income was included in the W-2.
After exposed to those questions, who'd expect that the "sold for taxes" 1099B
entries make no difference to the tax computation.

Thanks!