Understanding Wash Sale Rules When RSUs Vest and Sell-to-Cover for Taxes Occurs

The IRS doesn't specify exactly which shares get sold in a sell-to-cover situation, so the answer depends on your broker's specific methods for identifying shares. Most brokers use a "first-in, first-out" (FIFO) method by default, but some allow you to specify which tax lots to sell. For your situation, what typically happens is that the 240 shares sold for tax withholding would be considered separate from your specific tax lots. The wash sale rule would still apply to your 250 shares sold at a loss, and the disallowed loss would be added to the cost basis of 250 of your newly vested shares. You would need to check with your specific broker to determine which of your remaining 360 shares contain the adjusted basis. Some brokers will clearly identify which shares have the adjusted basis in your account. If you want to recognize the loss, you would need to sell those specific shares with the adjusted basis. Just be careful not to buy any more shares within 30 days after selling those adjusted-basis shares, or you'll trigger another wash sale!

I went through a similar nightmare with my RSUs last year and found out about taxr.ai (https://taxr.ai) which really helped me understand my specific situation. I was totally confused about wash sales with my quarterly RSUs and how they affected my tax loss harvesting strategy. Their system analyzed my trading history and RSU documents and gave me a super clear explanation of which transactions were creating wash sales and how my cost basis was being affected. It basically confirmed that in my case, the shares used for tax withholding were separate from the ones with adjusted basis - so I still needed to sell the remaining shares with adjusted basis to claim the loss. What I liked was getting a personalized analysis rather than general advice that didn't account for my specific grant dates, vesting schedule, and trading window restrictions.

Just wanted to update that I tried taxr.ai after seeing the recommendation here. Uploaded my trade confirmations and RSU grant documents and got a really detailed analysis. Turns out in my situation, the broker was using FIFO for the sell-to-cover shares, which means the oldest shares (including some with adjusted basis from previous wash sales) were being sold for tax withholding. They showed me exactly which lots still had disallowed losses embedded in the cost basis and gave me a strategy for how to claim those losses properly. Way more helpful than the generic answers I was getting from my company's benefits team. Definitely worth checking out if you're dealing with this specific RSU/wash sale headache.

After struggling with similar RSU wash sale issues for years, I discovered Claimyr (https://claimyr.com). I had repeatedly tried calling the IRS for specific guidance on my complex RSU situation but could never get through. With Claimyr, I actually got connected to a real IRS agent in about 20 minutes who walked me through the exact reporting requirements for my situation. They explained that I needed to track which specific shares had the adjusted basis from wash sales and report them correctly on Form 8949 with the appropriate adjustment codes. The agent clarified that the broker doesn't make any special considerations for wash sales when doing sell-to-cover transactions - they just sell shares according to their standard lot selection method. Check out their video demo at https://youtu.be/_kiP6q8DX5c to see how easy it is to actually get someone at the IRS on the phone.

I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was desperate for answers about my RSU wash sale situation. I got connected to an IRS tax specialist in about 35 minutes (they texted me when they were about to connect me). The agent explained that when shares are sold to cover taxes upon vesting, those specific shares never actually "enter" my account, so they're treated differently than if I had sold them myself after receiving them. They also confirmed that if I want to claim the losses from the wash sale adjustment, I need to identify and sell the specific shares that had the cost basis adjustment, and I can do that by requesting specific tax lot identification from my broker rather than using the default FIFO method. Definitely worth the time saved compared to the hours I spent on hold previously trying to get this same information.

I've been dealing with RSUs for about 10 years and here's what I've learned about wash sales in this specific scenario: 1. When RSUs vest, they are considered acquired on the vesting date at FMV 2. If you sold shares at a loss within 30 days before vesting, those get flagged as wash sales 3. For the sell-to-cover portion, most brokers (Schwab, Fidelity, E*TRADE) use FIFO by default unless you've specified otherwise 4. The remaining shares that hit your account will include those with adjusted basis In your scenario, of the 360 shares that remain in your account after sell-to-cover, 250 of them will have the adjusted basis. You'll need to eventually sell those specific 250 shares to claim the loss that was disallowed. What I do to avoid this mess: I make sure not to sell any company stock at a loss within 30 days before my vesting dates. It's cleaner that way.

Has anyone figured out whether there's any way to SPECIFY which shares get sold during the sell-to-cover process? My company uses E*TRADE and every quarter I have the same issue with wash sales messing up my tax loss harvesting.

For anyone dealing with this complicated situation, another solution is to hold your RSU shares for long-term capital gains treatment (over 1 year) before selling. The tax benefit of long-term vs short-term capital gains often outweighs the benefit of tax loss harvesting in many cases. This approach also eliminates the wash sale headache completely since you're not selling at a loss. I switched to this strategy after spending way too much time trying to optimize around wash sales and found that the simplicity and long-term tax benefit was ultimately better. Just something to consider if you're tired of dealing with all these complex wash sale calculations every quarter!

This is a really complex situation that I've been wrestling with too. One thing I've learned from my tax advisor is that you should also consider the timing of when you can actually sell those shares with adjusted basis. Since you mentioned you're only allowed to trade during open window periods, you might be stuck holding those adjusted-basis shares for months until the next trading window. This creates another layer of complexity because the wash sale clock keeps ticking - if you buy any more company stock (including through additional RSU vesting) within 30 days of when you eventually sell those adjusted-basis shares, you could trigger another wash sale. Have you considered whether your trading window restrictions make tax loss harvesting with company stock even worth pursuing? Sometimes the constraints make it more trouble than it's worth compared to just focusing on tax loss harvesting with other positions in your portfolio that don't have these restrictions.

I've been dealing with a very similar situation with my company's RSU program. One thing that helped me was requesting detailed cost basis reporting from my broker (Schwab in my case). They can provide a breakdown showing exactly which tax lots have wash sale adjustments and the adjusted cost basis amounts. What I discovered is that the wash sale rules create a "daisy chain" effect - the disallowed loss gets added to the cost basis of the replacement shares, but you have to be very careful about which specific shares you sell to actually realize that loss. In your case, since 240 shares were sold for tax withholding, you'll need to determine if those were among the 250 shares with adjusted basis or not. I ended up creating a spreadsheet to track all my RSU vestings, wash sale events, and adjusted cost basis amounts because the broker statements don't always make it crystal clear. It's tedious but necessary if you want to properly claim those losses eventually. One strategy I've adopted is to avoid selling company stock at a loss in the month leading up to vesting dates. It's not always possible given trading windows, but it eliminates this entire headache when feasible.

As someone who's dealt with this exact scenario multiple times, I can confirm that the wash sale situation with RSUs is incredibly frustrating. Here's what I've learned from experience: The key insight is that the sell-to-cover transaction happens automatically and you typically can't control which specific shares are used. Most brokers use FIFO, so if you have shares with adjusted cost basis, there's a good chance some of them were used in the sell-to-cover. What I do now is contact my broker immediately after each vesting event to get a detailed breakdown of: 1. Which shares were actually sold for tax withholding 2. The specific cost basis of those shares 3. Which of my remaining shares have wash sale adjustments This information isn't always obvious in the standard account statements, but most brokers can provide it if you ask specifically. One thing that really helped was setting up automatic alerts 35 days before each vesting date to remind myself not to sell any company stock at a loss. It's not perfect given trading window restrictions, but it's prevented most of the wash sale headaches. Also worth noting - if you're in a high tax bracket, sometimes it's actually better to just hold the RSUs long-term rather than trying to optimize around these wash sale rules. The long-term capital gains treatment can be more valuable than the short-term tax loss harvesting, especially when you factor in the time and complexity involved.

I've been through this exact situation and found that the most practical approach is to work backwards from your Form 1099-B to understand what actually happened. Your broker is required to report the wash sale adjustments, and this will show you exactly which shares had adjusted basis and whether any of those were used in the sell-to-cover transaction. In my experience with similar RSU programs, the 240 shares sold for taxes are typically processed as a separate transaction from your 360 remaining shares, but the wash sale adjustment applies to specific tax lots based on FIFO ordering (unless you've changed your default method). Here's what I'd recommend: Contact your broker's tax department and ask for a "wash sale detail report" for the transactions around your Sep 28 vesting. This will show you exactly which of your remaining shares carry the $8/share cost basis adjustment. One key thing I learned - you don't necessarily need to sell all 360 shares to claim the loss. You only need to sell the specific 250 shares (or whatever subset) that have the adjusted basis. But identifying which ones those are requires getting the detailed lot-level information from your broker. Given the complexity and your trading window restrictions, you might also want to consider whether the tax benefit is worth the administrative headache. Sometimes simplifying your approach (like holding RSUs long-term or avoiding loss harvesting near vesting dates) provides better peace of mind even if it's not perfectly tax-optimized.