My form 1099-B from morgan stanley does not show any Taxes withheld. However, they did hold stocks to cover taxes. Does this sound like an error?

[TomYoung · Accepted solution]

No, almost certainly it's not.  I'm going to guess that the stock sold was received through some Employer Stock Incentive program like a NQSO, RSU, etc.   In these situations the cash for the stock sold "for taxes" is passed back to the employer, who pays the governments(s) and then sprinkles the taxes throughout your W-2.  Ask your payroll department if you are unsure.

If a broker actually withholds - called "backup withholding - then that withholding must be reported on Form 1099-B.

Tom Young

[aarya598]

Thanks Tom. A few additions - The stock was received as RSUs. Morgan Stanley does show line items under "Withhold to cover". Is that same as your "backup withholding"

[TomYoung]

NO.  I say that with EMPHASIS because you've already said that there are no taxes reported on your 1099-B.