Properly reporting RSU vesting and sale w/1099-B

[Lady-Taxpayer]

Up for inquiry is the following events affecting my RSU's (triggered by a merger).  I'd like to report them properly on 1099-B and anywhere else they need to be.  I did not pay for the shares.  Note: I've read some of the other help docs but did not see this exact scenario.

01/1/16 - 10 shares fully vest. Share value each is $10, resulting in $100 total compensation income.  For each RSU, received cash/share in new stock.
01/1/16 - 4 shares sold for tax.  Witholdings handled by company payroll.
02/1/16 - 6 remaining shares sold.  Handled by broker.

W2 - Taxes and the total compensation income of $100 are included. (Box 1, Box 14 - Other)

1099-B form displays: Short Term – Noncovered Securities* (Consider Box 5 (Noncovered Security) as being checked and Box 3 (Basis Reported to IRS) as not being checked for this section.  These transactions should be reported on Form 8949 Part I with Box B checked.)


(Box 1a) Description     : ACME, INC. I81U812
(No Box) Quantity        : 6
(Box 1b) Date Acquired   : 1/1/16
(Box 1c) Date Sold       : 2/1/16
(Box 1d) Gross Proceeds  : $60
(Box 1e) Cost Basis      : $60
(Box 1g) Wash sale loss  : blank
(Box 7)  Loss Not Allowed: blank
(Box 4)  Fed income tax  : blank

Questions:

1) For Box 1e - should the Cost Basis be the total compensation income reported on W-2 of $100?
2) Anything else I need to manipulate to ensure this is correctly entered?  I realize I probably will need to not use the import function and enter manually.

thank you!

[TomYoung · Accepted solution]

"1) For Box 1e - should the Cost Basis be the total compensation income reported on W-2 of $100?"

No.

"2) Anything else I need to manipulate to ensure this is correctly entered?"

No.

Tom Young

[Lady-Taxpayer]

Thanks!

[kalebral]

I have the exact same situation. Box 1E on my 1099 form is 0,  shouldn't it match box 1d as you have done in the example above?

[TomYoung]

You don't have the same situation.  

The original poster had a noncovered security and the broker put the correct basis in Box 1e.  That number didn't go to the IRS, but it was the correct basis of $10 per share for the 6 shares sold.

I expect that your 1099-B is reporting the sale as covered and, since 2014, brokers only have to report the "out of pocket" of the shares sold, which is $0 for the typical RSU.  You enter the 1099-B as it reads and then correct the basis, ("I have additional info" button), on the next page.

[kalebral]

Thanks for your help.  My issue is that my income from the sale of the RSU's after shares have been sold for tax purposes is being reported twice, once in my W2 and again in my 1099-B.

The section in the 1099-B is labeled - Noncovered Short?Term Gains or Losses on Gross Proceeds.  Box 1d has the total proceeds,  there is no box 1E, only a column for Cost or Other Basis which is 0.  Shouldn't I adjust my entry in Turbo Tax by adding the cost basis (same amount that is listed in Box 1d) to Box 1e?  

I didn't see an additional info button from your previous post.

[TomYoung]

@ kalebral

"Thanks for your help.  My issue is that my income from the sale of the RSU's after shares have been sold for tax purposes is being reported twice, once in my W2 and again in my 1099-B."

That's because you are reporting the WRONG BASIS.  The correct per-share basis to use is the same per-share "fair market value" figure your employer used to calculate the compensation income reported on the W-2.  Take that compensation income and divide it by the GROSS number of shares in the grant.  That's your per-share basis.  Brokers only need report your "out of pocket" cost for acquiring the shares which is $0 in your case.  So if you simply enter the 1099-B as it reads then you do report income twice: once as compensation on the W-2 and then again as an overstatement of capital gain on the 1099-B

Enter the 1099-B as it reads on the default 1099-B entry form but then click on the "I'll enter additional info on my own" blue button.  On the next page enter the correct basis in the "Corrected cost basis" box.  The correct basis is (number of shares sold) x (correct per share basis, which includes the compensation per share)

TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

Tom Young

NOTE: TURBOTAX CHANGES THE SECURITY SALES INTERVIEW JUST ABOUT EVERY SINGLE YEAR.  THE INSTRUCTIONS ON "HOW TO FIX" THE BASIS REFLECT THE STATE OF THE INTERVIEW FOR TAX YEARS 2016 AND 2017.

[kalebral1]

Thank you, this is immensely helpful!