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Tax burden vs RSU cost basis adjustment

Hello,

 

My company has RSU awards with incorrect cost basis. Obviously, there are several sales through 2023 as sell to cover taxes was exercised. Lets say there are 20 such transactions,

 

  1. For ex. When I import my 1099B my tax burden goes to 15000
  2. Then, when I start adjusting the cost basis, the tax burden comes down as I correct each entry 
  3. What I observed is after the 12th entry my tax burden stops reducing even after correcting the cost basis
    1. the said corrections amount to a low thousands in gain reduction but yet my tax burden is unchanged

My Question: what am I missing here ? in my simple head, I am reducing the taxable gain by correcting the basis, but I may be missing something obvious. Any pointers will be helpful.

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1 Reply
DavidD66
Expert Alumni

Tax burden vs RSU cost basis adjustment

RSUs are pretty straight forward; therefore, I recommend you enter your transactions manually.  I also recommend you enter 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  for it.  Since you are taxed on the entire amount, your 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 is the total value on the date the RSUs vested.  This is also the amount that it is added to your income and included in Box 1 of your W-2.  To get your cost basis per share, divide the total value upon vesting (the amount added to your income) by the total number of shares represented by the RSUs.

 

When shares are sold, whether or not it's to pay the tax withholding, that transaction will be reported on a Form 1099-B, however, the cost basis will probably be incorrect, so it will likely need to be adjusted when you enter it.  

 

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