How/who to properly reply to IRS about basis of unreported stock sale income?

This is actually a pretty common issue with stock-based compensation. The IRS automated matching system flags unreported 1099-B transactions, but doesn't automatically recognize the basis information. Here's what likely happened: When you sell stock the same day it's granted, the W-2 income and the basis on your 1099-B are essentially reporting the same thing through different channels. The IRS computer system doesn't automatically connect these dots. You were on the right track with your response, but you should definitely officially file the 1040X through proper channels in addition to your response letter. The IRS processes correspondence and amended returns through completely different departments. Your explanation likely went to someone handling correspondence who doesn't have the authority to process an amended return. For your next response, I would recommend: 1) File the 1040X officially through mail to the proper IRS address, 2) In your response letter, include proof that you've filed the amended return, 3) Clearly explain that the basis amount on the 1099-B corresponds to compensation already reported on your W-2, and 4) Include a copy of your W-2, the 1099-B, and a schedule showing how they relate.

I had almost the identical situation happen to me last year with my RSUs from my job. The IRS computer systems don't understand that the income was already reported on your W2 and is reflected in the basis on your 1099-B. I used https://taxr.ai to analyze all my documents and generate a customized response letter that explained exactly how the compensation was already properly reported. The system analyzed my W2, 1099-B, and the IRS notice, then created a perfectly formatted response that included a table showing exactly how each transaction tied together. It also automatically generated the proper amended forms. Seriously saved me hours of headache trying to explain a complex situation.

I had almost the identical situation happen to me last year with my RSUs from my job. The IRS computer systems don't understand that the income was already reported on your W2 and is reflected in the basis on your 1099-B. I used https://

I wanted to follow up on my skeptical comment earlier. I ended up trying taxr.ai for my own IRS notice about unreported stock sales, and I've got to admit it worked incredibly well. The system created a detailed response showing exactly how my stock compensation was already included on my W2, with a clear reconciliation table for each transaction. Just got my response from the IRS yesterday - they accepted everything and canceled the proposed additional tax assessment! The response letter the system generated was way more professional and detailed than anything I could have put together myself. They even cited the specific IRS publications and tax code sections relevant to stock-based compensation.

This is exactly the kind of situation where you need to talk to a real person at the IRS, but as we all know, that's nearly impossible. After dealing with a similar issue and spending days trying to get through on the phone, I finally used https://claimyr.com to get a callback from the IRS. You can actually see how it works in this video: https://youtu.be/_kiP6q8DX5c Instead of waiting on hold for hours, they navigated the IRS phone system and got me a callback from an actual IRS agent. The agent was able to put notes in my file about my basis issue and gave me specific instructions on exactly what documentation to send and where. Made a huge difference in getting my issue resolved correctly.

After my skeptical comments earlier, I feel like I should update everyone. I tried the Claimyr service mentioned above to get through to the IRS about my stock basis issue. I was extremely doubtful it would work, but within 90 minutes I had an IRS agent calling me back. The agent was able to see my case details and explained exactly why my previous responses weren't being processed correctly. Turns out I had been sending my documentation to the wrong department. She gave me a specific fax number to send my basis documentation to and added detailed notes to my account about the situation. She also gave me a direct reference number to cite in my follow-up correspondence. Just received confirmation yesterday that they've accepted my documentation and are closing the case with no additional tax due. Could I have eventually figured this out myself? Maybe. But after months of frustration, getting to speak with someone who could actually help was absolutely worth it.

Make sure you point out specifically in your response that the basis amount was already included as income on your W-2. The IRS computers just see missing 1099-B transactions and automatically assume the worst (zero basis). There's a specific form you should include - Form 8949 (Sales and Other Dispositions of Capital Assets). Make sure each transaction is listed with the correct basis amount and check box "B" to indicate that basis was reported to the IRS. This form should accompany your 1040X. And yes, you definitely made a mistake by not officially filing the 1040X. The IRS has separate departments for correspondence and amended returns. The person reviewing your letter likely doesn't have authority to process an amended return that just came in with correspondence.

I went through this exact nightmare last year! My company gives RSUs and the IRS completely messed up the basis calculation. The key is filing Schedule D and Form 8949 correctly - each stock sale needs to be listed with the proper basis. One thing to be super clear about - the "proceeds" from your stock sales (on the 1099-B) aren't new income if the basis equals those proceeds (since you already paid tax on the income through your W-2). The IRS computers often miss this connection. My first attempt at fixing this on my own failed miserably. I ended up hiring a CPA who specializes in tech compensation, and she wrote a detailed letter explaining exactly how each transaction tied to my W-2 income. Cost me $350 but saved thousands in incorrect tax assessments.