Why did I get a 1099-B if my employer took 19 shares to pay for taxes at issue and it was included on my W-2?

[chrisingrassia]

In Feb 2018, my company issued 50 RSR's to employees as a retention bonus that would vest in Feb 2020. According to docs from my employer, they withheld 19 shares from my 50 RSR award ("Any required taxes on the RSRs are collected by withholding shares....The amount of taxable income will be reported on the individual's W-2 in the tax year that the RSR has fully vested"). I sold my remaining 31 shares the day they vested. I got a 1099-B in the mail a week ago for the 31-share sale. I'm confused.....they withheld 19 shares to pay for taxes, but the proceeds from the 31 shares I sold are ALSO taxable??? Then what tax(es) did the 19 shares withheld pay?!?!?

[DavidD66]

When you were issued the RSUs, that was a taxable event.  The value of all 50 shares was ordinary income, and subject to federal, state, and payroll taxes just like your paycheck.  That's why the value of all 50 shares was included on your W-2.  The 19 shares that were withheld were done so to pay the tax on the value of all 50 shares. 

When you report the sale of the 31 shares, if the cost basis on the Form 1099-B is not the same (per share) as the value that was included on your W-2 you will have to adjust your cost basis; otherwise you pay more tax than necessary.

[chrisingrassia]

Thanks David!! You said..."The 19 shares that were withheld were done so to pay the tax on the value of all 50 shares."

What tax exactly?

Is this situation essentially like my employer giving me a $2500 cash award, which had standard payroll taxes withheld. Then the "net" award to me (let's say $1500) I then used to buy shares of my employer, and then I sold them.....which shouldn't the tax on the stock sale just be capital gains tax?

[ThomasM125]

Since the value of the restricted stock is considered compensation, it is included in your wage income on your W-2 form, and is taxed at ordinary tax rates. If you sold the stock when you acquired it, there would be little if any capital gain, since the value of the stock was reported as ordinary income and you sold it for that value.

If you held the stock and it appreciated, the gain on that appreciation would be considered a capital gain and taxed at capital gain tax rates if you held it for more than a year.

The the value of the stock that the company withheld was used to pay your payroll taxes and some of it was credited to your tax withheld as reported on your W-2 form, just as if you had been paid a wage. 

[chrisingrassia]

I'm sorry, if you wouldn't mind helping me get my tax liability figured out here then. There's something I'm not quite understanding then. Based on my documentation:

My 53 shares were worth $2568.93 in Feb 2020 when they vested; that amount is included in my W2 box 1 2020 wages. Employer withheld 22 shares to pay my $1071.32 in tax liability; I assume that amount is included in my corresponding W2 boxes for taxes withheld. That makes sense to me.

When I sold the 31 shares that day, my "net award" was $1468.02.

So now I get taxed again on $1468.02 when I enter in a 1099-B???? That's what doesn't make sense to me. Basically the "award" I got that was "worth" $2568.93 at vesting is going to end up being like $700 cash in my pocket?? That would be a joke.

At the end of the day, I'm just trying to figure out what I do with the 1099-B that was mailed to me. Box 1e and 1g are blank.

[WendyN2]

If you personally sold the 31 shares then your employer would not have included this in your gross wages. You would need to verify this with your employer because if they did include all 53 shares in your gross wages, and they also issued you a 1099-B for the sale of the 31, then yes you are correct in that they made a mistake and you would wind up being double taxed on the same income. If I were you, and I know this is kind of a pain, but worth it, I would calculate what your gross wages should be based on your pay and work weeks and try to see if that total amount was or was not included in your gross wages. In addition, on the 1099-B I don't suppose anything is checked off as far as boxes 6, 8, 10, and/or 12? It does sound to me, as well as though something went awry. But, again, check your numbers against your pay stubs (hopefully it is as easy as accessing these online) and see what that actual gross income figure in total is representing before going any further. No need to pay double taxes on your money, that is for sure! 

[chrisingrassia]

I just realized today that I can upload pictures. I'm getting lost a bit with some of the explanations but I do really, really appreciate the tax expert support. Since the IRS pushed our taxes back until May, I now have some extra time to really feel confident with what I need to be doing here. Please see these pictures, I've done my best to redact identifying personal info and employer info. Why I'm trying to figure this out is because I filed our taxes in Feb 2021, and then very shortly afterwards I got the 1099-B in the mail and now I just don't know if I need to amend/re-file our taxes. The 1099-B has no boxes 6/8/10/12/etc....

Final 2020 paystub2020 W-2 boxesRestricted share sale receipt2020 1099-B

[ThomasM125]

To make this simple, you only need to be concerned about the income of $1,497.61 reported on your W-2 form for the value of the stock. That amount was included in your wage income. So, when you enter the form 1099-B, you need to list that as the cost basis for the stock sale.

You will see an option to adjust the the gain on sale of an investment when you enter the 1099-B information in TurboTax, just adjust the gain by decreasing it $1,497361 as follows:

[chrisingrassia]

Thanks @ThomasM125 

But I'm sorry, I literally don't understand what I'm specifically supposed to enter into TurboTax and where. Can you give me step-by-step? This is the first time in my life I've ever done anything related to stocks, and for good reason clearly (which is why I immediately sold them, I want nothing to do with this stuff). I can't interpret my W2 compared to final 2020 paystub, YTD earnings figures don't add up at all, where does my fed taxable gross come from which is lower  than my regular pay earnings? How is that possible??

My TurboTax doesn't have the screenshot you provided. Mine is asking me what the Sales Section is with six options to choose from of short term or long term, covered or noncovered? I have no clue. Isn't my cost basis $0 since they were an employer award and they cost me nothing?

Here's what I also don't understand.....what on earth did the 22 shares "withheld for taxes" pay for? Whose taxes?......Mine? Or my employer's? It's seeming like I'm paying taxes via the shares withheld as well as on the sale of the shares? That seems like out of 53 shares awarded, I'll end up with like 18 shares-worth after it's all said and done?

[ThomasM125]

If you contributed to a 401-K retirement plan at work, that contribution would be subtracted from your gross wages as reported on your W-2 form, so that is one way your W-2 earnings would be less than your actual earnings.

When you receive the stock, it is taxable income to you, just like if you received a paycheck. So, there are payroll taxes and withholding taxes that have to be paid from it, so the company sells some of the shares to come up with the taxes due. So, you get less than the full amount of the shares awarded to you, since some of them were kept to pay your taxes, FICA, Medicare and income taxes.

Please use these menu tabs to enter your form 1099-B:

1. Income and expenses
2. Investment income
3. Stocks, Mutual Funds, Bonds, Other
4. Indicate that you sold investments
5. Indicate that you received a form 1099-B
6. Choose the "I'll type it in myself" option
7. Enter the name of the investment company
8. Choose "I'll enter a summary of each sales category"
9. Enter the proceeds and cost basis listed on your form 1099-B
10. Choose box A, short term covered
11. Check the "I need to enter amounts from box 1f, box 1g, or other adjustments" box
12. Subtract the cost basis reported on your 1099-B form from the income reported on your W-2 form for it and enter that amount as "Total adjustments to gain or (loss)" as a negative (-) amount and enter code "B"

[chrisingrassia]

Thanks @ThomasM125 , I appreciate you sticking with me on this. Some of your directions though aren't quite verbatim step-by-step with the TurboTax website layout. See these pics and tell me if I'm in the right place and entering in what I need to?

• Choose "I'll enter a summary of each sales category"
  • No idea where this is.
• Enter the proceeds and cost basis listed on your form 1099-B
  • My box 1e on 1099b for any "cost basis" thing is blank
• Choose box A, short term covered
• Check the "I need to enter amounts from box 1f, box 1g, or other adjustments" box
  • No idea where this is.
• Subtract the cost basis reported on your 1099-B form from the income reported on your W-2 form for it and enter that amount as "Total adjustments to gain or (loss)" as a negative (-) amount and enter code "B"
  • Again, my box 1e on 1099b for any "cost basis" thing is blank......so, based on what you just said I'm assuming my "total adjustment to gain or (loss)" is $1498 because that's what's on my paystub.......what do you mean by "for it" on my W2 form? I have gross wages, net wages, and tax withholding on my W2, that's it. What do you mean "for it"? What is "it" on my W2?

Are the 22 shares withheld paying my employer's taxes or my taxes? If they pay mine, then why am I having to add anything to my taxes for when I sold the shares.

[AmyC]

@chrisingrassia   You had questions but did it anyway! You entered the sales category, made adjustment, if $1,498 was the amount included in box 1 on your w2 for this sale, perfect.

The sale of the stock would be to cover your Medicare and Social Security taxes along with some portion being added to your federal taxes paid.

The sale of the stock is considered income because it was sold to benefit you. You are able to claim credit towards Social Security and credit for federal tax paid. You had a loss since the w2 income is more than the sale price. The expenses of the sale give you a small loss for your tax return.

[chrisingrassia]

@AmyC 

Thanks for jumping in here. I honestly don't know if you all are just messing with me or not. Box 1.......on my W-2......is not $1497. I even posted a picture of what my W-2 box 1 reads -- $103646. Not $1497. I cannot comprehend how complicated this is trying to use TurboTax. I'm even posting pictures and screenshots of my documents and just can't seem to get crystal clear guidance. What figures need to go where?

If I understand you correctly, I paid $1071.32 in federal/state taxes when the stock award "vested" and was issued to me. Then I have to pay full taxes again when I sell the remaining shares? That seems pretty outrageous. That's double taxation, is it not?

[DianeW777]

No, there is no double taxation. Let's see if I can help expand on some information.  If you check the document you received showing you your total taxable income from this transaction it is $,2568.9236 ($2,569). You noted this in your earlier post.  Because of the nature of this stock, an income component must be included in your taxable income and it is included in Box 1 of your W-2 (even though it is only stated on a separate document and not recorded in Box 14).

Keep in mind that the $1,071 is fully credited to you as tax paid and withheld. This portion is from the shares withheld to pay the federal and state taxes on your behalf as mentioned earlier on the total of vested shares income.

For this reason, you are allowed to add the $1498 as cost basis of the stock that was sold.  There is no double taxation because this wipes out any capital gain and as noted there is a small loss on the transaction which is likely an expense associated with the sale. The only income being taxed is from your W-2 after all is entered.

[chrisingrassia]

Hi @DianeW777  -

Thanks for stepping in here. OK hang on.....so after all this back-and-forth here, are you telling me this is all I needed to be inputting is to look just like this???? 🙄