I was awareded 9 RSU units and the company sells 4 of them before the rest hits my E-Trade account. The 1099-B from E-Trade only shows the proceeds from the sale of the 5 shares I sold and shows the taxes paid as $0.00. I checked my paystub for the pay cycle for when I sold the shares and I see the YTD for Federal taxes increased by several thousands (without additional income for that pay cycle being taxed). So I assume they added the proceeds from the shares they withheld for tax purposes and added it to my withheld federal taxes for me.
My confusion is how do I cover my ass for this on my tax return in Turbo Tax? When I upload my 1099-B, Turbo Tax sees I had a RSU sale for $3560 and sees "Taxes withheld: $0.00" when in reality, it was more like a $6400 sale, $2800 in taxes paid, and $3560 remainder. So turbotax assumes I didn't pay tax on the $3560 short term sale proceeds and said I owe tax on that. Basically double taxed.
So now I have one document from my company called "Release Details" showing
Award Shares: 9.00000
Shares Traded: (4.0000)
Shares Isssued: 5.0000
Market Value: $6,416
Total Tax: $2,851.76
…and then E Trade's 1099-B shows simply:
Proceeds from non-covered securities: $3560
Federal Income Tax Withheld: $0.00
So the taxes I already paid are mixed in with my Box 2 so what do I do so that when I upload the 1099-B it doesn't say I owe another $2,851?
Handling RSUs on TurboTax when employer witholds 40% of units to pay taxes. Those taxes aren't reflected on 1099-B but are included in W2
byu/tmntnyc inpersonalfinance
Posted by tmntnyc
8 Comments
The 1099-B will include the basis of thr sale which is the value of the stock when it vests. Thus no gain net gain in value of the stock so no taxes owed from the 1099 B
The w2 shows income from the stock vest and the taxes withheld via the stock sale.
You need to include the cost basis of those shares, which would be the value at time of vesting.
I can’t speak for E-Trade, but I have this same issue with fidelity. It reports my cost basis as 0 for the RSUs and it makes my taxes increase significantly. The fidelity document has a section lower in the 1099 that lists the adjusted cost basis (the real cost basis) and that is what you need to enter into TurboTax. I’m not in front of my PC at the moment so I can’t look at the exact verbiage but there should be a section for adjust cost basis in TurboTax where you can enter the real info and then your taxes will be correct.
You need to adjust the cost basis on the sale in TurboTax. See if E-Trade issued a supplemental form separate from the 1099-B for this.
Note that in TurboTax there’s different fields for “Adjust” depending on which page you are on. I believe one is Adjust gain or loss and one is Adjust cost basis. These are different and you may need to do some math to figure out the correct amount
As others have said, you may need to make adjustments.
UBS has an RSU tax guide which walks you through step by step. Hopefully E-Trade has the same, try to look for it.
If your RSUs are in your W2 you shouldn’t be reporting them separately.
If you sold your stocks you need to include the cost basis to avoid paying taxes on the full value of the shares. If you didn’t sell them there isn’t anything to do here.
If you sold there are three events:
1. You receive $6,416 of shares this is counted as normal income at that amount, that should be part of your W2
2. You sold some of those shares for taxes setting aside $2,851.76 for withholding this should also be part of your W2
3. You sold the remaining shares and you need to assign a cost basis of $3,564.33 and use the actual sale price to calculate your gains (or losses) this should be covered by a 1099 but won’t necessarily tell you that cost basis
For tax purposes, RSUs work like the company paid you a cash bonus and then reached back into your pocket to buy shares with that money.
Ignore the strike price and quantity; all that matters is the quantity left after vesting and the price at vesting.
A lot of people have made incorrect comments, so I’m starting fresh. For RSUs the cost basis will always be listed as $0 on the 1099-B – this is something the IRS instructs brokerages to do. To handle this:
1. Completely ignore the 4 shares that were sold for taxes. The have already been added to your w-2 and you do not included them anywhere else on your tax forms.
2. For the 5 shares that were granted to you and you subsequently sold you will need to compute the adjusted basis. This will be 5 times the share price at vesting (usually the previous day’s closing price). You should have gotten a supplemental form from your company or brokerage with this share price. Then you enter this computed basis in the adjusted basis field and set code “B” as the adjustment reason. This should effectively zero out the gains to within a small margin depending on how much the share price changed from vest until sale.