RSU Cost Basis

[bmshah1]

I am little confused on how to find my cost basis for the RSU that I sold last year. This is what happened in my case. On 12/7/2023 a total of 141 RSU's vested out of which 42 were withheld for tax purposes leaving me with net 99 units. The unit price on the day of vest was 29.41. The FMV of the total 141 units vested was 141*29.41 = 4146.81. The 42 units that were withheld for taxes had a FMV of 1235.22.

I sold the 99 units last year for a price of 31.82/unit for a total proceed of 99*31.82 = 3150.18. My 1099 lists the cost basis for the 99 units as 99*39.41 = 2911.59 which I think is incorrect as it does NOT take into account the 42 units that were withheld back for taxes. Is my cost basis 4146.81 or 2911.59 or something else. 

My W2 shows an amount in box 14 with RSU VEST as a code. This amount does include the 2911.59 (amount I received from the sale) +1235.22 (taxes withheld when the RSU vested).

(Note: I had sold other RSU's throughout the year so the actual amount on box 14 is different)

[ThomasM125]

Assuming you didn't pay anything for the stock units, your cost basis in year of sale would be their fair market value when they were acquired times the number of units you sold in the current year. Income equal to the fair market value of the units is entered on your W-2 as compensation in the  year they vest, so that would be your cost basis. Divide that by the number of shares vested and you have the cost basis of each share. Multiply that by the number of shares sold and you have your cost basis upon sale of the units.

[bmshah1]

Thomas,

I didn't pay anything for the RSU. For the year they vested how do I find out the FMV of the units entered on my W-2. Which box they would be displayed under? Also if I sold multiple RSU's that vested at different time how would I know the FMV for each of the lot that vested as my W2 will only show me a single number. Also how do I take into account the RSU's that were withheld for paying taxes in the year that the RSU vested. 

My 1099-B shows a cost basis in column 1e but I'm not sure if it is the adjusted cost basis. 

[DavidD66]

You should be able to get a statement showing your RSU activity.  If they don't make them available online, check with your HR or Payroll Department.  There is often a supplemental schedule included with your Form 1099-B that shows your correct cost basis for the units sold.  If you have your earnings statement (or if they are available online) for the pay period that RSUs vested and were added to your income there is probably a separate line item on your statement showing the amount that was included in your income for that award. 

How you handle the units that were withheld for tax depends upon whether they were sold or withheld.  Restricted Stock Units (RSUs) are not actually shares of stock, rather, they represent shares of stock.  When they vest, it is common for units to be "withheld" to pay the tax.  This means the employee never actually receives the stock, so it doesn't need to be sold to pay the tax.  If they are not reported as being sold, you don't have to account for the sale, because there wasn't one.  You have to include those units in your calculations if you are using the total value of the award to determine a cost basis.  If shares of stock were sold to pay the taxes, then the sale would be reported on your 1099-B.  

[bmshah1]

@DavidD66 thanks for the explanation. For the RSU's that were vested the total FMV is added to my W2 as compensation but I only get RSU's that are available after withholding the units needed to pay for tax. For example if 100 RSU vested at FMV of $1,000 but 10 were used to pay taxes the compensation added to my W2 is $1,000 not $900. How do I account for this higher compensation on my W2 as in reality I only got $900 in my pocket and not $1,000 as was added to my W2. 

[MarilynG1]

Per your example, you would take the $1000 that was added to your W-2, divide by number of shares (100) and add the amount of $10 to your Cost Basis for each share when reporting the sale of the remaining shares from your 1099-B. 

Your employer may have issued a Form 3922 showing the Exercise Price per share, to which you add the difference you were taxed on your W-2 to get the corrected Cost Basis.

You should end up with a small Capital Gain or Loss. 

Here's more info on RSU's and Taxes.

@bmshah1 

[bmshah1]

@MarilynG1 I never got a 3922 from from my employer or the brokerage but I found a document on the brokerage website that gives some information. Here's what that document shows for one of the RSU's that vested. 

It shows the vest date and the FMV of the shares as 29.41 (actual market closing price that day). The total units vested were 141 out of which 42 were withheld for taxes. The taxable compensation was listed as 4146.81 (29.41*141). The value of total proceeds is listed as 2911.59 (99*29.41).

In this case what is my actual cost basis? 

[DavidD66 · Accepted solution]

RSUs are pretty straight forward.  When RSUs vest, it is similar to getting a cash bonus.  When you get a cash bonus, a portion of it goes to pay withholding tax.  When RSUs vest, a portion of it goes to to pay withholding tax.  RSUs are not actually shares of stock, rather they represent shares of stock.  Instead of selling shares of stock to pay the withholding tax, the company withholds RSUs with a value equal to the amount of withholding tax due.  Shares of stock are issued for the remaining units.  The total value of the RSUs that vest is ordinary income (just like a cash bonus) and is included in your taxable wages.  The value is determined by the price of the stock on the day the units vest.  

In your case, you had 141 RSUs that vested when the market price was $29.41.  Your taxable income that will be included in box 1 of your W-2 is 141 x $29.41 = $4,146.81.  Since 42 units were withheld to cover your payroll tax withholding, you only received 99 shares of stock.  The cost basis of that stock is $29.41 per share, or $2,911.59 for all 99 shares.  The 42 shares that were withheld, they are gone, and don't figure into anything else.

When you sold the 99 shares you were issued for $31.82 per share, with a cost basis of $29.41 per share, you realized a gain of $2.41 per share.  You sold 99 shares, so your proceeds were (99 x $31.82) = $3,150.18.  Your cost basis was (99 x 29.41) = $2,911.59.  Your gain was (99 x 2.41) = $238.59, or ($3,150.18 - $2,911.59) = $238.59.  If the amount on your Form 1099-B does not have a cost basis of $2,911.59 you need to adjust the cost basis.  Enter what is on the 1099-B, and then you will be given the chance to adjust the basis in TurboTax.        

[bmshah1 · Accepted solution]

@DavidD66 thanks for such a great explanation. Answered my question and confusion.