unclear on entering 1099b

[jyeh74]

Entering 1099B but there are so many inputs.  Not sure if you just enter 1d which is total reportable proceeds.  But then where do you enter 1e which is the reportable cost.  

But then there are sections of Short Terms with Box A, basis report to IRS, Box A, Ordinary basis reported to IRS, Box B, basis not reported to IRS, Box B Ordinary basis reported to IRS

Long Term with Box D, basis reported to IRS, Box D, Ordinary basis reported to IRS, Box E, basis not reported to IRS, Box E, Ordinary basis reported to IRS.

It is not clear if you have to enter each section with the associated Box a through E or just enter the 1d and 1e (I can't find where to enter 1e)  Is there a video of instructions?

[jyeh74]

I also see a section called Short Term - non covered.  Doing some research, it says non covered means that the cost basis is not reported to the IRS?  So does that mean the total proceeds under the non covered presume that the cost basis is 0 or 100% taxable? 

How do I subtract out the cost basis?  You would think the broker calculates the cost basis for you.  It is too difficult to determine cost basis calculation for each quantities sold.

[ThomasM125]

If the cost basis is $0 on your Form 1099-B it may mean that the broker does not know the correct cost basis. They may or may not report the $0 amount to the IRS, but in either case you can adjust that amount to report the correct cost basis.

You can enter the sales summary of each box code. You will start by entering the description of each section referencing short-term or long term and how that group of investments is reported to the IRS (short term bases reported, not reported, etc...) Your entry there will determine the code that TurboTax will assign automatically. 

On that same screen, you will enter the cost basis as reported in box 1e on your Form 1099-B. If the cost basis is wrong or missing, you will check the I need to adjust the cost basis box and you will see an option to enter an adjustment to the basis reported, and you can choose the code that best explains the reason for your adjustment.

[jyeh74]

When you look at the supplemental document, you see “adjusted amount” (ordinary income)

For things like ESPP is that is the discount of the stock?  

For things like RSUs, what is this?

[ThomasM125]

ESPP means employee stock purchase plan. It is stock in the company you work for that you purchase typically at a discount. The discount you receive is taxable when you sell the stock as wage income. As such, the discount you received when you purchased the stock is reported on your W-2 as wage income in the year you sell the stock. When you report the sale as reported on your Form 1099-B, the cost basis usually needs to be adjusted to compensate for the income reported on your W-2 form, otherwise you may be double taxed on it. That may be the adjustment you a speaking of. When you enter ESPP stocks sales in TurboTax, you need to indicate that when asked and you will be asked questions to determine the correct tax treatment of the stock sale.

A RSU is a restricted stock unit. It is company stock the is typically given to you at no cost or at a minimal cost. When you receive ownership of the stock the value of the stock less what you paid for it is entered on your W-2 form as wage income. Also, it is subject to social security and Medicare tax, so some of the shares are typically sold to pay your share of those taxes. So, you will need to report those sales on your tax return from the Form 1099-B that will be generated. Once again, you need to indicate in TurboTax that you sold RSU's so the program will ask you the correct questions to insure the income is taxed properly. You do this when asked "What type of investment did you sell?" 

[jyeh74]

@ThomasM125 Why is ESPP reported under "covered securities" and RSUs reported under "non covered securities" in the 1099B?

Why does the 1099B not show the correct adjusted cost basis, and you need the supplemental document?  Is it a timing thing on how things are reported so its not captured correctly on the 1099B?

On the supplement document, I notice this:

For RSU, the adjusted cost basis (ordinary income) is usually close in dollar amount to the total proceeds.  The cost basis is usually 0 since the stock as given to the employee.  Your explanation for ESPP and RSU adjusted cost basis makes sense.  It's because the proceeds are already added to the W2 as income so to avoid double counting/taxing, the cost basis usually needs to be adjusted to compensate for the income reported on your W-2 form.  I just noticed for the RSUs, the adjusted cost basis (ordinary income) is close to in dollar amount to the total proceeds.  But for the ESPP, the adjusted cost basis (ordinary income) is a small percentage to the amount of the total proceeds.  Trying to understand the logic of how this person got compensated.

[ThomasM125]

The term "Covered" means the cost basis was reported to the IRS. Most likely the broker wouldn't report the cost basis when they were not confident that they knew what it was. That may be the case with an RSU since you may or may not have paid something to acquire it, so the cost basis may not be known or tracked by the broker. With stock options, the cost basis is simply the discount received when the stock was acquired or sometimes when sold, so it may be easier to track. That ties in to the cost basis reported on the Form 1099-B, the simplest way to determine it is to look at what the cost of the stock was to the buyer. But in the case of employee stock, the simple method often yields the wrong result.

With ESPP, the cost basis would be what you paid for the stock plus the discount reported on your W-2 form. You may have sold the stocks after they appreciated in value, so there would be more capital gain income than with RSU's that may have been sold to pay taxes at vesting, at virtually the cost that you recognized on your W-2 form.