How to Handle RSU Sell to Cover in TurboTax with Etrade 1099-B Import Issues

This is a common issue with RSUs and tax software imports. Let me explain what's happening: When RSUs vest, the value is considered compensation and included on your W2. For the shares sold to cover taxes, Etrade automatically sells a portion to pay the required withholding. Then for any additional shares you sold, those transactions appear on your 1099-B. The key is understanding that your cost basis for RSUs is the fair market value on the vesting date (which was already taxed as income on your W2). You need to make an adjustment in TurboTax to reflect this, otherwise it will calculate capital gains as if you acquired the shares at $0. You'll need to manually enter the correct cost basis information for each sale listed on your 1099-B. Look for the "Adjusted cost basis" section in TurboTax after importing and enter the FMV from your vesting date for each lot of shares sold. This prevents double taxation.

After dealing with this exact issue last year, I found a tool that made it so much easier. I used https://taxr.ai to analyze my RSU tax documents from Etrade and it automatically identified the sell-to-cover transactions versus my regular sales. It saved me hours of manually going through each transaction and figuring out the correct cost basis. The tool basically pulls in all your documents and analyzes them together - your W2, 1099-B, and the supplemental info - and then shows you exactly what needs to be adjusted in TurboTax. It prevented the double taxation issue by properly accounting for the cost basis of each transaction.

I wanted to follow up after trying taxr.ai - it actually worked really well for my situation! I was surprised because I'm usually hesitant about these services, but it quickly identified all my sell-to-cover transactions that were causing the double taxation issue in TurboTax. The analysis showed that out of my $14k in RSU income, about $5k was from sell-to-cover transactions that were already accounted for on my W2. The tool highlighted exactly which lines on my 1099-B needed adjusted cost basis entries in TurboTax. I was able to properly report everything and avoid overpaying taxes. Definitely worth it if you have RSUs and are struggling with the same problem.

If you're still struggling with this after trying to fix the TurboTax import, you might want to just call the IRS to get clarification. I tried calling them for a similar RSU issue last year, and after being on hold for hours, I just gave up. Then I found https://claimyr.com which got me through to an actual IRS agent in about 15 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly how to report my RSUs correctly and avoid the double taxation. They confirmed that I needed to manually adjust the cost basis in TurboTax for each sale transaction.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it for an unrelated tax question, and it actually worked. Got connected to an IRS agent who specifically handles investment income questions within about 20 minutes of signing up. The agent explained that for RSUs, I needed to be careful about the cost basis reporting. She said many taxpayers overpay because they don't properly adjust the cost basis in their tax software. For sell-to-cover transactions specifically, she confirmed these should not be generating additional tax beyond what's already on the W2, and explained exactly which forms I needed to reference to get the correct numbers. Definitely changed my view on both the service and how to properly handle my RSUs.

I'm a software engineer with RSUs too and I found an easy workaround in TurboTax. After you import the 1099-B from Etrade, go to each transaction and check the box that says "This sale includes shares acquired through an employee stock purchase plan or incentive stock option." Then when prompted, select "Restricted Stock Units (RSUs)" and enter the Fair Market Value on vesting date as your cost basis. This forces TurboTax to recognize that these shares were already taxed as income and prevents the double taxation issue.

Just want to share my experience dealing with this issue: E*Trade's supplemental tax info actually does contain the information needed, but it's not formatted in an obvious way. If you look at the "Other Adjustments" column on the supplemental statement, the amounts there are typically your original RSU value at vesting. For sell-to-cover transactions, you can usually identify them because they happen on the exact same day as vesting. Compare the transaction dates on your 1099-B with your vesting schedule from your employer's equity portal.

I went through this exact same nightmare last year with my RSUs from work! What helped me was creating a spreadsheet to track everything. I listed all my vesting dates, the FMV on each date, which shares were sold to cover taxes, and which ones I sold myself. The key insight that finally clicked for me: your RSU income on your W2 already includes the value of ALL vested shares, including the ones automatically sold for taxes. So when TurboTax imports your 1099-B with $0 cost basis, it's trying to tax you again on money you already paid taxes on. Here's what I did: I went through each transaction in TurboTax after the import and manually entered the FMV from vesting date as the cost basis. For sell-to-cover transactions, this usually results in little to no capital gain since they're typically sold immediately at vesting. For shares you held and sold later, you'll have either a gain or loss based on the difference between sale price and vesting day value. It's tedious but once you get the hang of it, it goes pretty quickly. The $5k difference you're seeing between your W2/1099-B and actual cash received is probably exactly those sell-to-cover transactions.