First-time filing taxes with RSU income on my W2 and 1099 showing zero cost basis - how to properly report this?
Hey everyone, I'm really confused about how to handle my taxes this year since I received RSUs for the first time. My employer included the RSU grants as income on my W2 with the appropriate withholding. But now I also received a 1099 from my brokerage showing all my stock sales with a cost basis of ZERO for everything! It seems like my income is being double reported - once on my W2 and again on the 1099 since it's showing no cost basis. This can't be right, can it? I'd be paying taxes twice on the same income. My brokerage did send me a supplemental statement showing the actual cost basis for each sale transaction. So I'm wondering - do I need to manually subtract the cost basis from the gains reported on the 1099? How exactly am I supposed to report this on my tax return? I've never dealt with RSUs before so I'm completely lost on how to handle this correctly. Any help would be super appreciated!
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Paloma Clark
This is actually a common situation with RSUs. Here's what's happening: when your RSUs vest, the value is included as income on your W2. Then when you sell those shares, your broker reports the sale on a 1099-B, but often doesn't include the cost basis. You're right that you don't want to pay taxes twice! When you enter your 1099-B information into your tax software, you'll need to manually input the correct cost basis from that supplemental statement your broker provided. This ensures you're only taxed on the actual gain or loss from the time the shares vested to when you sold them. For example, if your RSUs vested at $100/share (reported on W2) and you sold at $120/share, you'd only be taxed on that $20/share gain. Make sure you enter the vesting price as your cost basis.
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Heather Tyson
•But wait, what if the shares went down in value before I sold them? Like if they vested at $100 but I ended up selling at $80, do I still have to pay income tax on the $100 from my W2?
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Paloma Clark
•Yes, you'd still pay income tax on the full $100 that was reported on your W2 when the shares vested - that's considered compensation income regardless of what happens later. But the good news is you'd report a $20 capital loss on your Schedule D when you sell. This capital loss can offset other capital gains or up to $3,000 of ordinary income per year (with the ability to carry forward additional losses to future years).
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Raul Neal
I went through this exact same nightmare last year, and discovered taxr.ai (https://taxr.ai) which helped me sort through all my stock documents. It's specifically designed to handle RSUs, options and other equity compensation that most general tax software struggles with. The software pulled in my W2 and 1099 data then automatically matched up the cost basis issues. It identified which RSU lots were from which vesting periods and properly accounted for the cost basis that was already taxed as income. Saved me a ton of time and probably kept me from making a costly mistake!
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Jenna Sloan
•Does it work if I already started filing with TurboTax? I'm halfway through my return but completely stuck on this RSU issue.
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Christian Burns
•Sounds interesting but can it handle ESPP sales too? I have both RSUs and ESPP shares and the reporting is a complete disaster every year.
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Raul Neal
•Yes, you can import your in-progress TurboTax return into taxr.ai and continue from there. It'll preserve all your already entered information while helping you correctly handle the RSU reporting. ESPP shares are definitely covered! The software handles the qualifying vs non-qualifying disposition rules and correctly calculates the ordinary income vs capital gains portions. It's specifically built for equity compensation scenarios that traditional tax software doesn't handle well.
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Christian Burns
Just wanted to update - I tried taxr.ai after seeing the recommendation here and it was exactly what I needed! It automatically identified my RSU sales vs my ESPP sales and correctly handled all the cost basis adjustments. The interface shows you exactly what portion was already taxed as compensation vs what's being taxed as capital gains. Wish I'd known about this years ago instead of manually tracking everything in spreadsheets and making errors.
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Sasha Reese
If you need clarification on how this all works, I found that calling the IRS directly can be super helpful with complex tax situations like RSUs. But after spending HOURS trying to get through their phone system, I discovered a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how to properly report RSUs when you have both W2 income and a 1099 with zero cost basis. Made me feel much more confident I was doing it right.
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Muhammad Hobbs
•How exactly does this work? The IRS phone line is always busy when I call. Does Claimyr just keep dialing for you or something?
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Noland Curtis
•Yeah right, no way this actually gets you through to the IRS faster. They just want your money. I've been trying to reach the IRS for weeks about my refund.
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Sasha Reese
•It basically uses an automated system that navigates the IRS phone menu and holds your place in line. Once it reaches an agent, it calls you and connects you directly. No more listening to that same hold music for hours! The service was created by someone who got fed up with the same problem we all have - trying to reach the IRS. It's not a scam - it literally just holds your place in line and calls you when an agent is available. Saved me an entire afternoon of waiting on hold.
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Noland Curtis
I was totally wrong about Claimyr. After posting my skeptical comment, I was desperate enough to try it because I needed to sort out my RSU taxation issue before filing. Got connected to an IRS agent in about 20 minutes after trying for WEEKS on my own. The agent walked me through exactly how to report my RSUs correctly and now my return is filed! Sometimes it's worth admitting when you're wrong - this service actually delivered.
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Diez Ellis
Another thing to watch out for with RSUs - make sure you're looking at the correct lots if you had multiple vesting dates! Each vest date has its own cost basis, and if you don't specify which shares you're selling, your broker might use FIFO (first in, first out) which could result in higher taxes depending on price changes. Also, some companies withhold shares at vesting for tax purposes. So if you were granted 100 shares but only received 65 because 35 were withheld for taxes, make sure your records reflect this correctly.
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Evelyn Kelly
•Thanks for pointing this out! I did have multiple vesting dates throughout the year. Does the supplemental statement from my broker typically show which specific lots were sold? Or do I need to figure that out myself?
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Diez Ellis
•The supplemental statement should show the specific lots that were sold, including acquisition dates (vesting dates for RSUs) and cost basis for each. If it doesn't, you might need to log into your brokerage account and look at the transaction history. Most brokers give you options for which lots to sell - FIFO (first in, first out), LIFO (last in, first out), highest cost, lowest cost, etc. If you didn't specify at the time of sale, your broker likely defaulted to FIFO, but the supplemental statement should indicate exactly which lots were used.
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Vanessa Figueroa
Has anyone tried using H&R Block for RSUs? TurboTax completely messed up my return last year and I'm wondering if other software handles it better.
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Abby Marshall
•I used H&R Block last year and it was just as confusing. They don't have a specific walkthrough for RSUs and I ended up having to manually adjust everything. Ended up getting a CP2000 notice from the IRS because something was reported incorrectly.
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Ella Russell
•I had a similar experience with H&R Block - it wasn't much better than TurboTax for handling RSUs. The general tax software packages just aren't built to handle equity compensation properly. After reading through this thread, I'm definitely going to check out taxr.ai for next year. It sounds like specialized software is really the way to go for RSU situations like ours.
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Zadie Patel
This is such a helpful thread! I'm dealing with the exact same RSU confusion this year. One quick question - when you're entering the correct cost basis from the supplemental statement, do you need to make any adjustments for the shares that were automatically sold to cover taxes at vesting? My company withheld about 40% of my vested shares for tax withholding, so I'm not sure if I should be tracking the cost basis for those withheld shares differently since I never actually received or sold them myself. The supplemental statement seems to only show the shares I actually sold later, not the ones that were automatically withheld. Also seeing a lot of mentions of taxr.ai in this thread - definitely going to check that out since TurboTax is making this way more complicated than it needs to be!
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