IRS sent me a bill for unreported RSU sales - did they assume zero cost basis?

Yes, you're exactly right about what's happening. When you don't report stock sales with the proper cost basis, the IRS automatically assumes your cost basis is $0, which means they think the entire sale amount is taxable gain. This is why you're seeing such a large tax bill. The good news is this is fixable! Since you paid income tax on these RSUs when they vested (which should indeed be reflected on your W-2 from 2020), that vesting price becomes your cost basis. You'll need to file an amended return (Form 1040-X) along with a corrected Schedule D and Form 8949 showing the proper cost basis for each RSU sale. Make sure to gather all your transaction records from your brokerage showing the acquisition date (vesting date), cost basis (fair market value on vesting date), sale date, and sale price. Include these as documentation with your amended return.

I went through something similar last year with unreported RSU sales and found this amazing tool called taxr.ai (https://taxr.ai) that literally saved me thousands. It's specifically designed for situations like yours where you need to reconstruct cost basis data for stock sales. I uploaded my brokerage statements, W-2s, and the IRS notice, and their system analyzed everything and generated all the forms I needed to respond to the IRS, including the 1040-X, Schedule D, and Form 8949 with all the correct basis information. Their system even explained how my RSUs were already taxed at vesting and calculated the adjusted basis to avoid double taxation.

I have to admit I was totally wrong about taxr.ai. After my skeptical comment, I decided to try it myself since I had a similar issue with unreported stock sales (though mine were ESPP shares, not RSUs). The tool was actually incredibly thorough and straightforward. It identified exactly where my cost basis was wrong and showed me that I had been double-taxed on some of my stock compensation. The amended return they helped me prepare got accepted by the IRS without any questions, and instead of owing $8,700 like the IRS initially claimed, I ended up only owing $1,320. Their analysis even found some deductions I missed in my original filing. The step-by-step walkthrough of how RSUs and stock sales are taxed was worth it alone - I finally understand how all this stuff works!

If you need to talk to the IRS about this (which you probably should), good luck getting through to them. I spent THREE DAYS trying to get someone on the phone about a similar notice. Then I found this service called Claimyr at https://claimyr.com that somehow gets you through to an IRS agent usually within 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Honestly, for an issue like unreported RSUs with potentially thousands in tax implications, I'd recommend talking directly to an IRS agent before just sending in forms. They were surprisingly helpful once I actually got through, and they explained exactly what documentation I needed to submit.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it as a last resort because I was getting nowhere with the IRS about my own tax issue (not RSU related, but a missing stimulus payment). I couldn't believe it when my phone rang 12 minutes later and it was actually an IRS representative on the line! The agent was able to look up my account, confirm they had received my amended return, and explained exactly when I could expect it to be processed. I'm still in shock that it worked. After literally months of trying to get through on my own with no success (always getting the "call volumes are high" message), this saved me so much frustration. Definitely worth it for peace of mind alone.

Pro tip from someone who handles RSUs regularly: Always keep documentation from each vesting event, especially the fair market value on vesting date. This is your cost basis, and you need it to avoid exactly this situation. I create a spreadsheet each year with columns for: - Vesting date - Number of shares - FMV at vesting - Total value (reported as income on W-2) - Sale date - Sale price - Gain/loss since vesting (this is what goes on Schedule D) This makes tax time so much easier and helps prevent these IRS notices.

Something else to consider - check if your employer offered a "sell-to-cover" option where they automatically sold some shares to cover the tax withholding at vesting. If so, your W-2 already includes the income from the RSUs, and you only need to report any additional gain or loss that occurred between vesting and when you sold the remaining shares. When I had my IRS notice for unreported stock sales, I found out my company had only withheld at 22% for federal taxes, but I was in the 32% bracket, which created additional confusion.