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Returning Member
posted Dec 14, 2021 3:12:43 PM

IRS saying I underreported taxes even though I didn't

Recently I got mail from IRS stating that I had underpaid taxes for a prior year. My company paid a part of my salary via RSUs and used Morgan Stanley to manage my account. Whenever my stock vested Morgan Stanley sold one third of my stock to pay taxes. Apparently Morgan Stanley has sent a 1099 to IRS where they had reported the stock they sold to pay taxes on my rsu vesting as income. I always thought that my W2 had my full income including my RSU vest and taxes which included the stock Morgan Stanley sold to cover my taxes on my rsu which was already in my W2. Am I not correct? My W2 only has the total tax withheld. It doesn't give a break down of how much was the money withheld from my salary and how much was the money that was part of the RSU sale. I just inputted the W2 info and other 1099 into turbotax but never inputted Morgan Stanley 1099 since I just saw that as holder of my stocks and never did any trading there. What can I do to rectify the situation?

0 4 2669
4 Replies
Level 15
Dec 14, 2021 3:43:37 PM

Ok ... you failed to report the 1099-B from the broker on the return ... the basis for the stock you sold was reported on the W-2.  So it seems you only reported the W-2 and now the IRS needs the form 8949 & Sch D filled in as well.   Good news is that you will have a loss on the sale for the amount of the broker's sales fee.  

Returning Member
Dec 16, 2021 4:20:13 PM

the 1099-B I received from my brokerage reports the "gross proceeds minus commission" box id and "cost or other basis" box 1e. Both match closely except box 1e is plus dollar 20 than box 1d. However, on my form CP2000 IRS says the entire box 1d is income?

Level 15
Dec 16, 2021 4:24:21 PM

It is all income to them since they only got notice of the SALES price and not the cost basis ... you need to report the cost basis on the Sch D which you must not have done because they sent a CP2000 notice.  Again the fix is easy ... fill in the 8949 & Sch D and mail it back to them as directed.  

Level 15
Dec 16, 2021 4:29:01 PM

you can try talking to your broker to see if they know anything.  this is a public forum. we can't see any of your documents. if your broker can't help them I suggest

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