What's the right way to enter info for a RSU sale (traded to pay tax) in 1099?

Forum|Forum|4 years ago
March 27, 2022
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Hi, I'm so confused about how TurboTax generates form 8949 for a RSU sale to cover tax in 1099. I came up with two examples I encountered. Both of them are under the scenario of in a RSU vest, a portion is traded to pay for the taxes withheld (happened on the same day of the vest), and another portion is left untouched (deposited in the broker account) for the tax year.

I don't get why Example 1 results in a gain in form 8949 while Example 2 does not. Can any tax expert/TurboTax tech support explain what happened?

Edit: added a more extreme case, Example 3, which follows the same TurboTax calculation weirdness as Example 1. The more I exercise this TurboTax calculation the more I feel it is a bug. Can someone confirm or provide guidance?

Example 1

Lets say I have 19 RSUs vested this year, my employer traded 10 of them to pay for the taxes withheld, which is presented in 1099 as a sale. The rest of 9 RSUs are left untouched (deposited in the broker account).

When I enter vesting information as Total Shares Vested: 19, Shares Withheld to Pay Taxes: 10, the RSU result details page shows 9 shares sold and in form 8949 box 1 (h) shows the gain of a share market price.

(where does that 9 shares sold come from??)

Example 2

Lets say I have 14 RSUs vested this year, my employer traded 7 of them to pay for the taxes withheld, which is presented in 1099 as a sale. The rest of 7 RSUs are left untouched (deposited in the broker account).

When I enter vesting information as Total Shares Vested: 14, Shares Withheld to Pay Taxes: 7, the RSU result details page shows 7 shares sold and in form 8949 box 1 (h) shows the gain roughly to 0.

Example 3

Lets say I have 1 RSUs vested this year, my employer traded 1 of them to pay for the taxes withheld, which is presented in 1099 as a sale. No remaining RSU to sell (by myself) from this vest.

When I enter vesting information as Total Shares Vested: 1, Shares Withheld to Pay Taxes: 1, the RSU result details page shows 1 shares sold and in form 8949 box 1 (h) shows the gain of a share market price.

(the traded to pay taxes RSU should have taxed in W2, why it is shown as a separate sale and marked for capital gain here??)

Best answer by GeorgeM777

Yes, entering your RSU sales in the manner you describe is an option for you. Because you know the cost basis (adjusted if necessary), dates of vesting and sale date (i.e., holding period), and proceeds you can enter these amounts into TurboTax and prepare an accurate tax return. In connection with entering the RSU information, answer NO to 'is this employee stock ' which will avoid having to enter vesting info, stock sold for taxes, etc. Then you can just enter the relevant information and treat these transactions as if they were regular stock sales.

@wznesh6a

GeorgeM777

Example 1 - Not sure why your return reflects that 9 shares were sold given that you did not sell them. In TurboTax desktop, the RSU results page should reflect the shares sold to cover taxes and may also reflect that amount as compensation income. Compensation income should already be included in Box 1 on your W-2. Do you know if the shares that were sold to cover taxes were sold at a gain or loss? Generally, same day sales are effected at the same price as the share price of the vested RSUs, so there is no gain or loss to report. However, there could be a small loss to report if commissions were charged on the sale. If you have such a loss because of the commissions, you could report such loss as a "plain vanilla" stock loss. In other words, just enter as you would a regular stock sale without going through the RSU pages.

Example 2 - Because there was no gain or loss on the sale of the shares to cover the taxes, the market price for that sale must have been equal to the market price for the vested RSUs.

Example 3 - You are correct in that the value of all vested shares, (which includes the shares that were sold to cover) should already be included on your W-2. In other words, there is no need to enter this income twice. If there was a gain on the sale of the one share, it is likely because when your firm sold that one share, the market price was greater than the market price for the vested RSU.

@wznesh6a

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wznesh6aAuthor

@GeorgeM777 thanks for the response! to add more context here: in all three examples, the shares that were sold to cover taxes were sold at a small loss, and for our case, it is shown as a normal sale in 1099-B, that's why it is confusing when Example 1 and Example 3 have a gain especially when using TurboTax's RSU related process there.

Sounds like the TurboTax's RSU related process is problematic for my case. Could you confirm a way out is to enter them as regular stock sales and adjust the cost basis correspondingly?