How to properly adjust RSU cost basis using TurboTax Desktop?

[lowted]

Hi, I've reviewed similar questions but haven't found the answer I'm looking for....

I was granted 4 RSU's and 3 were sold immediately for withholdings. This transaction is reported on the 1099-B as a sell event. Those withholdings from the sell event are reflected on my paystubs/w-2 as they should be.

The 1099-B shows the shares that were automatically sold to cover as a sell event, with a $0 cost basis. (At the bottom of the 1099, it does show the "real" cost basis in a supplemental info section!)

So, I think I understand the tax scenario, my problem is how to enter this scenario into TurboTax:

1. If I enter the shares in the "Shares Withheld (Traded) to Pay Taxes" box it wont calculate properly because the sale itself "IS" the sale that was used to pay taxes/withhold. If I do enter it here I am left in a shortage of shares because it thinks some were sold AND I'm selling the shares with this sale event.  Can someone please confirm that, in this scenario: Since this sale of shares "IS" the actual sale event used for withholding event itself, I should NOT enter anything in this  "Shares Withheld (Traded) to Pay Taxes" box?

2. It seems I just need to manually adjust my cost basis, right? If so, how do I do this with TurboTax? The only option I see is to calculate the difference between the proceeds and the real cost, then enter that value in the "An adjustment is required for a reason not covered" section. Is that right? I'm worried that an arbitrary adjustment here would get flagged by the IRS (even though I have paystubs/transaction histories to prove the sale is the withholding event).

I'm using TurboTax Premier Desktop 2022. Thanks for any help.

[GeorgeM777]

Question 1.  Yes, you should not report the sale of the 3 RSUs.  If you still hold the remaining RSU, there is nothing to report in connection with the RSUs that were sold to cover.  When the 4 RSUs vested, that vesting represented compensation and should be included on your W-2.  Your company had an obligation to effect tax withholding, which it appears they did when they sold 3 RSUs to cover.  The resulting tax withholding amount should also be on your W-2.  The vesting and sold to cover transactions do not need to be reported in TurboTax as these transactions are already included on your W-2.  

If you sold that remaining RSU or any other RSUs in 2022, then those transactions need to be entered into TurboTax and reported on your tax return.

Question 2.  If this question relates back to the sale of the 3 RSUs to cover, you do not need to report this transaction on your return and consequently, there is nothing to enter into TurboTax.  The situation is different if you sold any remaining RSUs.  In that case, if you need to make an adjustment to the cost basis, you can do so in TurboTax.   As you progress through the various screens that relate to RSUs, you will see the screen Select any less common adjustments that apply.  Select the option An adjustment is required for a reason not already covered.  Entering a negative number will reduce any gain or increase a loss and entering a positive number will increase any gain or reduce any existing loss.  

@lowted

[lowted]

Thanks @GeorgeM777 ! However I think maybe something is missing here regarding my scenario: 

Regarding these statements: 
- "sold to cover transactions do not need to be reported in TurboTax"
- "the sale of the 3 RSUs to cover, you do not need to report this transaction on your return and consequently, there is nothing to enter into TurboTax"

The 3 shares that automatically "sold to cover" ARE listed on the 1099-B as a transaction and were automatically imported into TurboTax from my broker. I did not make the transaction manually. It happened automatically at vest and the proceeds were properly withheld on my W2. 

To make it even more clear: I did not personally sell these shares. They were sold automatically, 100% of the sale proceeds were withheld (I've confirmed this). Even though it was fully withheld, that transaction IS showing on my 1099-B as a normal sell transaction. 

With that all clear, can you please confirm that even though it's on the 1099-B as a transaction, I DO NOT need to report it as a transaction with my taxes!? If so, since the transaction imported automatically from my broker, should I delete the transaction in TurboTax? 

[GeorgeM777 · Accepted solution]

No, don't delete it.  After further review, and given the fact that your sell to cover transactions were reported on a 1099-B, enter the sell transaction into TurboTax as you would any other RSU transaction.  Ordinarily, the sell to cover transactions are not reported on a 1099-B, and thus, taxpayers do not need to separately report their sell to cover transactions.   In your case, because the three RSUs are on your 1099-B, go ahead and report them on your return as you would if you were reporting your personal sale of RSUs. 

Your cost basis is likely the same as the proceeds, and thus, there would be no gain or loss on the transaction.  Because it appears that the vesting and sale for withholding were done on or about the same time, the transaction would be considered short term.   

This sale will likely appear on your Form 8949.  Your return then will match what is on your 1099-B.

@lowted