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What does Short term sales with cost basis NOT reported to the IRS vs. Short term sales with cost basis reported to the IRS?

 What is Short term sales with cost basis NOT reported to the IRS vs.  Short term sales with cost basis reported to the IRS.



If I am paying short term gains its my normal tax rate say 33% all my long term gains will be 15% correct?


But when I add my stock trades I am taxed higher than the 33% and 15% for the portion of the gains. My totally income will not be higher than 33% with or without my stock trades.

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3 Replies
LeeM
New Member

What does Short term sales with cost basis NOT reported to the IRS vs. Short term sales with cost basis reported to the IRS?

Short Terms sales with cost basis means that both the sales proceeds and cost are reported to the IRS so that they and you have the information (from your 1099-B) to calculate your gain/loss. 

Short Term sales with cost basis not reported to the IRS means that they and probably you did not have the cost information listed on your Form 1099-B. 

If the cost basis was not reported or you did not enter it in TurboTax (either manually or from your Form 1099-B), then you should go back and revise your return before filing. You are taxed on the difference between your proceeds and the cost basis. So, as of now, you are being taxed on all of your proceeds. If you paid anything for the stock, etc. sold, then you are being over taxed.

If a cost basis is not reported, then you have to come up with one to enter. 

First, I would always be as conservative as possible if you follow the recommendations below.  

I would try to come up with a date range as close to the actual date acquired as you can (in your case it may be 1995). As long as it is over a year old, it will not make a difference for tax purposes. 

Once you have an acquisition date or range, I would go to the Yahoo Finance Historical Stock Price page at http://finance.yahoo.com/q/hp?s=YHOO.  

You can then enter the stock ticker symbol and date range for a list of prices by day. I would use the lowest stock price and day in your range as the date acquired and cost in order to be as conservative as possible. 


What does Short term sales with cost basis NOT reported to the IRS vs. Short term sales with cost basis reported to the IRS?

It's fairly easy to find out the stock price.

But what if the stock is RSU or Restricted Stock Unit, which costs me nothing except partial of that RSUs were sold to cover tax by the company before given to me.

 

Here is an example:

Assuming I was granted 100 RSUs by the company at $100 each share, that's a total $10,000.00.  Out of 100 RSUs, 30 were sold to cover tax, I only received 70 of such stocks, or $7,000.00 ,and I sold them the next day for the same cost (I received $7,000.00 in the bank account). 

 

On 1099-B, these 70 RSUs show up under short-term not covered with 0 cost basis, how do I proceed then with Turbo-Tax? Do I not enter anything for Box-B and just report them as Box-C (assuming I was given a supplemental information with adjusted realized gain/loss)?

DianeW777
Employee Tax Expert

What does Short term sales with cost basis NOT reported to the IRS vs. Short term sales with cost basis reported to the IRS?

Not covered simply means that the broker who issued the Form 1099-B did not have knowledge of your actual cost basis and so is not reporting that to the IRS.  You do enter your cost basis when you enter the Form 1099-B in TurboTax. Your cost basis in the stock is the value on the date the shares were vested and this same amount is included in your wages, Box 1 of your W-2. You will manually enter that cost basis when you enter the sale.

 

Keep in mind that you actually sold 100 shares.  The company sold the first 30 shares on your behalf to pay the taxes for you so that you would not have a big tax bill later.  Those taxes are also included in your W-2 as federal withholding, social security and medicare tax.  

 

Since you sold the stock immediately after they were vested, you will likely have a selling price close to the cost basis (fair market value on the date vested) or even a small loss if there are selling expenses. 

 

@uncletax1969

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