RSU Confusion With Sell to Cover and 1099-B

[WonkyWaffle]

I am a little confused about how to report on my RSU activity. I had 100 RSUs vest last year. My company sold 30 to cover the taxes. This a very common situation. 

Turbo Tax imported from Fidelity a 1099-B with the sale of the 30. But it looks like proceeds that need tax withheld as a short-term gain. The cost basis on the 1099-B is $0. I do have information on the sale price of the shares from the transaction.

Should I enter that sale price as the cost basis to net zero out? Do I edit the "Total Shares Vested/Released" to be just the 30 and not the 100? I don't see a reference to the 100 anywhere on the 1099-B. It's on the distribution statement and W-2 showing taxes withheld for them. Should the "Price you paid per share" be the same as the "Market price on vesting date"? Somewhere I think things need to balance to a net of zero since the taxes have already been paid. But I'm unsure how. Do I *not* report these as RSU transactions? Very confused.

[DavidD66]

RSUs are pretty straight forward; therefore, I recommend you enter your transactions without indicating you are reporting the sale of company stock.  Indicating that is company stock has no impact on what's reported to the IRS.  It only affects what screens and questions you get in the TurboTax interview.  When RSUs vest (the stock is delivered) the entire amount is ordinary income.  Your employer must collect payroll taxes, or sell shares to pay it.  Since you are taxed on the entire amount, you basis is the amount that is added to your W-2 which you are taxed on.  If you retain the stock, any gains on the sale will be short term if you hold the stock one year or less, and long term if you hold it more than one year.

Your cost basis (per share) is the amount (per share) that was reported on your W-2 as income.  Even if the shares were sold the same day, there could still be a difference (usually small) between your cost basis and the actual proceeds; therefore, it is normal for their to be a small gain or loss on a sale to cover transaction such as yours.  

[WonkyWaffle]

David I may need you to break this down more simply for me. 

When you say, "I recommend you enter your transactions without indicating you are reporting the sale of company stock.", do you mean to not report 1099-B or not to import it or do you mean to not indicate that it is an RSU in the step that asks?

When the RSUs vested, my employer did collect payroll taxes by selling some of my shares as I asked them to do. Since the taxes on the entire amount of additional income have already been paid, my issue is, in Turbo Tax I seem to be answering the questions in a way that is causing the program to want me to pay the taxes again. I have not sold the distributed shares that were not sold for taxes. I plan on holding on to them for a while. 

[DianeW777 · Accepted solution]

No, there is no indication the 1099-B should be ignored.  The recommendation by our Tax Expert @DavidD66 is that you report the 1099B directly under Investment Income sales because you have already reported the value of the restricted stock units (RSUs) in your wages.  As he stated, the income in your wages is the value on the vesting date and this becomes your cost basis per share received by dividing the total amount included in income by the total number of shares.

The 1099-B is simply stating that some of the shares were sold which are the 30 sold to pay your federal tax (and possibly state tax).  Your cost is the value on the vesting date which will be shown on your paperwork when the vesting occurred.

1. Use the Search (upper right) > type 1099b > Use the Jump to... link to begin > Scroll to the bottom of the page and select 'Add Investment' or Edit beside  your sale
2. Continue to change the cost basis and the number of shares (30) to the actual amount sold

[taxlady28]

Your employer is required to issue Form 3922.  If you can't find your copy, ask for another one.  Use the basis on 3922 to edit each of your stock transactions.  When basis is correct, your taxes will be correctly calculated.

[WonkyWaffle]

@taxlady28 your advice sent me down the right road. I looked up the 3922 and in Fidelity, there is a Supplemental Stock Plan Lot Detail with the full and correct basis information. 

With that, I followed @DianeW777 's advice and changed the cost basis and the number of shares to the actual amount sold which was 30. Now the math and tax burden seems to line up with a true adjusted gain/loss of only -$30.06 and certainly not resulting in thousands owed. 

I'm not sure the claim that "RSUs are pretty straight forward" is reassuring to a first-timer dealing with them and is evidenced by the other similar posts on in the community.

To anyone reading this after, it seems like there are a number of gotchas and extra diligence that a person needs to perform. I would hazard a guess that many people assume their tax documents will have everything they need. Taking the 1099-B at face value may do harm as a common complaint on the forums (and on my own docs) is they don't contain all the accurate information and there are short-term transactions for which basis is not reported to the IRS and is marked as $0. It took a day to figure it out. But it is definitely not plug-and-play. 

Lessons Learned on the 1099-B in TurboTax:
Box 1c and Box 1b are likely going to be on the same date

Box 1d is the value of the shares you received. 
Box 1e is the adjusted cost or other basis from the sale to cover taxes. Mine lost a little value from distribution to sale (-$30.06).  This may not be on your 1099-B and you may have to look for it. 
Be sure Box 2 is S = Short Term (since you sold the shares as soon as you got them)
Make sure when you enter the number of shares sold for your RSU questions it's only the amount sold for taxes and not the amount that was vested. 
On the Vesting or Release Information questions, the total shares vested/released will be what was distributed to you (100 in my case) and the shares withheld (traded) to pay taxes for me was (30). You'll need to find the market price on the vesting date. Also for me, the price I paid per share is $0. There was a $9.95 commission fee for the sale too that I added.

Doing those steps resulted in a prompt from TurboTax that asked if the amount computed in RSUs was included in wages? It was, Box 14 of my W-2 matched that amount. 

[jcardoso7]

@WonkyWaffle a hey I’m having a lot of trouble with a very similar challenge. Can I ask/beg for you help?

[GeorgeM777]

Because your tax situation is similar to that of WonkyWaffle, you can avoid the screens in TurboTax that relate to the sale of RSUs, and instead enter your sell to cover shares as a regular stock trade.  This assumes that your employer has already included the value of your RSUs on your W-2 which most employers do because they are required to do so.  You might also check box 14 on your W-2 because employers will usually enter the RSU value in box 14.  If the value of your RSUs when they vested has been entered in box 14 on your W-2, that amount has already been included in box 1, Wages.  

Next, you need to determine your per share basis in your RSUs.  To do this, divide the value of your RSUs on the day they vested (again, see if box 14 on your W-2 contains the value of your RSUs) by the number of shares you received (the total number of shares, that is, those that you held and those the company sold to cover).  The result will be your per share cost basis.  Then, multiply the number of shares that were sold to cover by the per share basis to determine your total cost basis in the shares sold to cover.  Compare that total cost basis with the proceeds of the shares that were sold to cover.  If the proceeds are greater, you have a gain, if less, you have a loss.  Report same on your tax return.  If neither a gain nor loss, report same on your tax return.  

To enter your RSUs as a regular stock transaction, follow these steps:

1. Sign-in to your account.
2. Select Federal in the left margin.
3. Select Wages & Income, left margin.
4. On Your Income and expenses screen scroll down to Investment and Savings.
5. Click on the drop-down arrow if necessary to reveal more options.
6. Click Start/Revisit across from Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
7. At the screen Let's import your tax info, you will see the option to Enter a different way.
8. Then select the type of investment.
9. Continue to enter information as prompted.
10. At the screen Now, choose how to enter your sales, make the appropriate selection.
11. Enter your stock information. 

If you are using TurboTax CD/download, the process is very similar.  

Just an fyi, because you are entering your RSUs as a regular stock transaction, at the screen, Was this a sale of employee stock?, you can select No, this is not employee stock, and avoid all of the RSU related screens. 

@jcardoso7