How to properly calculate cost basis for ESPP stocks and RSUs when transferring brokerages?

The cost basis for ESPP and RSUs can definitely be confusing, but you can absolutely handle this yourself with the right information! For RSUs, the cost basis is typically the fair market value (FMV) of the shares on the vesting date. This amount was already reported as income on your W-2 for the year they vested. When you sell these shares, you'll calculate capital gains/losses based on the difference between your selling price and this FMV at vesting. ESPP shares are more complicated. Your cost basis depends on whether you had a qualifying or non-qualifying disposition. Generally, it's the purchase price you paid through the plan. However, if you received a discount when purchasing (common in many ESPPs), part of that discount might have been reported as income on your W-2. What you should do: Before transferring, download and save ALL historical statements from your Etrade ESPP account. These should include grant dates, vesting dates, purchase prices, and fair market values at various points. Also get copies of any Form 3921 (for ESPP) and Form 3922 (for RSUs) they may have provided over the years. These documents will give you everything you need to calculate cost basis yourself, and you can definitely move to a commission-free brokerage once you have this information.

I went through this same nightmare last year! I highly recommend checking out https://taxr.ai for analyzing your stock documentation. I had a similar situation with moving my ESPP shares from the corporate account to my personal brokerage, and I was terrified about messing up the cost basis calculations. What worked for me was uploading all my Etrade statements and tax forms to taxr.ai, and it analyzed everything and provided a clear breakdown of my cost basis for each lot of shares. It showed exactly how much of my ESPP discount was already taxed as ordinary income and what my adjusted cost basis should be. The service even identified some calculation errors in Etrade's reporting that would have cost me hundreds in overpaid taxes. The best part was that I could just forward all my brokerage documents directly to them, and they extracted all the relevant information automatically - saved me hours of spreadsheet work trying to compile everything myself!

I was skeptical about taxr.ai at first, but I gave it a try after struggling for weeks trying to calculate my cost basis for some Microsoft RSUs I'd held for years. I was planning to sell them and was worried about getting hit with unexpected taxes. The service was surprisingly thorough - it showed me exactly what portion of each RSU grant was already taxed as income when they vested, and what my actual cost basis should be for capital gains calculations. It even flagged some shares where my broker was showing an incorrect cost basis that would have resulted in double taxation! What I found most valuable was the tax planning feature - it showed me which specific shares to sell to minimize my tax hit based on my holding periods. I ended up saving about $3,700 in taxes by selling specific lots in a particular order that I wouldn't have figured out on my own. Definitely worth checking out if you're dealing with RSUs or ESPP shares from former employers - way easier than trying to recreate years of stock plan history on your own.

If you're struggling to get through to the IRS about stock basis issues (which I was for MONTHS), I highly recommend using https://claimyr.com to get actual human help. You can see how it works here: https://youtu.be/_kiP6q8DX5c After my company was acquired, I had a complete mess with my cost basis for ESPP shares that transferred to the acquiring company. The new broker had no idea how to handle it, and I couldn't get through to anyone at the IRS who understood the issue. I used Claimyr and was connected to an IRS agent in under 25 minutes (after trying for WEEKS on my own). The agent was able to confirm exactly how I should handle reporting the cost basis for my transferred shares and explained what documentation I needed to keep to support my calculations. Completely worth it compared to the endless hold music and disconnects I faced trying on my own.

Alright, I need to eat my words. After my skeptical comment yesterday, I decided to try Claimyr just to prove it wouldn't work. I've been trying to get help from the IRS for WEEKS about how to handle my cost basis for some ESPP shares where the original purchase documents were lost. I used Claimyr this morning, and I'm still in shock - I got connected to an IRS agent in about 35 minutes (would have been 3+ hours if I had called myself based on their message). The agent was actually super helpful and directed me to a specific section of Publication 550 that addresses exactly my situation with missing cost basis documentation. The agent also told me about a form I didn't even know existed (Form 8689) that I can submit with my return to explain the missing documentation situation. This would have been nearly impossible to figure out on my own. So yeah, I was wrong. If you're struggling with ESPP or RSU cost basis issues, getting direct answers from the IRS might be the way to go.

Quick tip for anyone with ESPP shares - there's a huge difference in taxation depending on how long you've held them. If you hold ESPP shares for at least 1 year from purchase date AND 2 years from the offering date, it's a "qualifying disposition" and you get better tax treatment. For RSUs it's simpler - you were already taxed on the full value when they vested (check your old W-2s, box 14 might show this). When you sell, you only pay capital gains on any growth since vesting. I recommend getting a copy of your "stock plan transaction history" from Etrade BEFORE you transfer. Also check if they can provide "supplemental tax reporting" documents - usually these have the details on original grant prices, discount amounts, FMV at various dates, etc.

I had this exact situation with my ESPP shares from Apple. What I did was download the "Gain/Loss" report from Etrade, which showed both the purchase price AND the FMV (fair market value) at the time of purchase. Save that before you move your shares! To calculate your cost basis: - For RSUs: Your cost basis is simply the FMV on vesting date - For ESPP with 15% discount: Look up if it was a qualifying or non-qualifying disposition. For tax reporting purposes, cost basis isn't just about what you paid - it's about what you've already been taxed on. For RSUs, you were already taxed on the full value when they vested, which is why that becomes your cost basis. I would 100% move these shares to a no-fee brokerage. The $18 trade fee is highway robbery today!

Has anyone used TurboTax for reporting ESPP and RSU sales? I'm wondering if they have any built-in tools for calculating the correct cost basis. I transferred my shares to Fidelity last year and now I'm worried I might mess up my taxes.

One thing I'd add to all the great advice here - make sure you understand the "look-back" provision that many ESPPs have. This can significantly affect your cost basis calculation and whether you have a qualifying disposition. Many ESPPs allow you to purchase shares at a discount based on the LOWER of either the stock price at the beginning of the offering period OR the stock price at the end of the offering period. If your plan had this feature, your actual purchase price might be different than what you think, and this affects both your cost basis and the amount of discount that gets taxed as ordinary income. I learned this the hard way when I sold some old ESPP shares and discovered my cost basis was actually lower than I calculated because of the look-back provision. Check your original ESPP plan documents or contact your former employer's benefits team to confirm if your plan had this feature. Also, don't forget that some brokerages will automatically apply incorrect cost basis adjustments when you transfer ESPP shares. Make sure to review and correct these before you sell, or you might end up paying taxes on money you've already been taxed on.