My company adds the proceeds from RSU/Option sales into the W2 wages and includes the value of the shares withheld for taxes into the W2 total taxes paid.

In Turbotax I can't figure out how to handle this. When I enter the 1099-B data on these sales as stock income Turbotax (generates form 8453) thinks I haven't paid any taxes (it sees this as additional income to the W2).

Any thoughts?

On the 1099-B I have

Options: Short Term for covered tax lots;
correctly shows gross proceeds and cost basis. The NET (which turbotax is treating all as profit and wants to tax) is equal to the actual cash profit + tax withheld as shares (included in W-2) + fees.

RSUs pre 2014: Long term for covered tax lots;
correctly shows proceeds of NET shares (GROSS - w/HELD for TAXES) * execution share price.
correctly shows basis of NET shares * basis share price
does not account for the shares withheld for taxes (should be included in W-2 total taxes)

RSUs post 2014: Long term for noncovered tax lots
correctly shows proceeds of NET shares (GROSS - w/HELD for TAXES) * execution share price.
no cost basis is provided, I added this in turbotax
does not account for the shares withheld for taxes (should be included in W-2 total taxes)

all I can figure from online reading is I need to adjust the 1099-B to zero out (or show a small loss due to fees) so that no taxes are applied to any of these gains.

But I don't see how my total tax liability can be calculated in this way. Neither the 1099-B nor the W-2 is really correctly showing the necessary information to calculate the correct tax rate for each of these items.

RSU and stock option reporting was changed a couple of years ago. 1099 does not reflect true cost basis. Not sure how you do it in turbo tax but read up on using form 8949 to adjust the cost basis to reflect it.

cclearman said:

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all I can figure from online reading is I need to adjust the 1099-B to zero out (or show a small loss due to fees) so that no taxes are applied to any of these gains.

But I don't see how my total tax liability can be calculated in this way. Neither the 1099-B nor the W-2 is really correctly showing the necessary information to calculate the correct tax rate for each of these items.

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Actually they are. You typically have a small loss for any fees on the trade. Your W-2 includes the income on the option and there is no gain on the 8949 and Schedule D. I don't use Turbo tax but if you monkey with it long enough, you should come out with a wash on the 8949 and Schedule D, or a small loss. If you wind up with that, then you have done it right.

Bucho said:

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RSU and stock option reporting was changed a couple of years ago. 1099 does not reflect true cost basis. Not sure how you do it in turbo tax but read up on using form 8949 to adjust the cost basis to reflect it.

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I believe the cost basis is the share price on day of vesting. At time of vesting a portion is sold off to cover the taxes automatically.

You should be able to import all that data. For some of my more complex stuff, it has been a life saver. You should try that or the monkeying bit.

The fact that you've held some of the options/RSUs for longer than 1 year is not relevant here. Stock comp is considered earned income & is taxed at regular rates, not capital gain rates. You need to report the gain/loss on the sale of stock, which is the difference between the sale price and the vest price. If you vested & sold on the same day, the gain should be zero (or a small loss for fees, as noted above). On the form (I'm assuming you meant form 8949 - 8453 is an efile form), show proceeds from the 1099-B in column D, your cost basis (probably 0) in column E, 'B' in column F, and whatever amount you need to show the proper gain/loss in column G.
*I am a CPA, but not your CPA*

may actually have a small loss as they should have some trading fees. but pretty much this is spot on.

erin2003 said:

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The fact that you've held some of the options/RSUs for longer than 1 year is not relevant here. Stock comp is considered earned income & is taxed at regular rates, not capital gain rates. You need to report the gain/loss on the sale of stock, which is the difference between the sale price and the vest price. If you vested & sold on the same day, the gain should be zero (or a small loss for fees, as noted above). On the form (I'm assuming you meant form 8949 - 8453 is an efile form), show proceeds from the 1099-B in column D, your cost basis (probably 0) in column E, 'B' in column F, and whatever amount you need to show the proper gain/loss in column G.
*I am a CPA, but not your CPA*

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Wouldn't taxable income from the exercise of the shares be the difference between the option price and market value when he exercised the options? Therefore, his basis for the 8949 is the exercise price. He's basically got two separate transactions here. 1) Exercise of the options (and taxable income for this transaction is in his W-2), and 2) sale of stock (which may have happened at essentially the same time and, therefore, may have a $0 gain for the 8949).

I went ahead and made adjustments to basically zero out the 1099-B information (minus fees)
And I am attaching a letter explaining the details from the transactions and showing how both the taxable income and taxes paid are included in the W2.

I still think it's ridiculous how they add this to W2 and report the 1099-B.

cclearman said:

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I went ahead and made adjustments to basically zero out the 1099-B information (minus fees)
And I am attaching a letter explaining the details from the transactions and showing how both the taxable income and taxes paid are included in the W2.

I still think it's ridiculous how they add this to W2 and report the 1099-B.

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The letter isn't needed, since your are handling it the way it is designed to be handled. You do not need to explain why your wages go on line 7, nor the details of this transaction. I doubt it would even get read to beging with. I have a corporate return under examination and the main thing it was selected on was explained in an attachment to the return and it was ignored, even by the examiner.

Also there should be a code in box 12 of your W-2 that gives an indication of what is going on.

this is what turbotax is telling me. Since I had to send in this form anyways I'm just going to include a letter.
I also spoke with a tax preparer and they said to send in a letter of explanation just in case.

Take a moment to double-check that your statements are complete. For each sale listed, there should be:

- A Description
- Date Acquired
- Date Sold
- Sales Price
- Cost Basis
- Gain or loss for each sale
- A sale category based on how the sale was reported to you and the IRS

In some uncommon cases, there will be an adjustment code and adjustment amount.

NOTE: Any sales summaries that include only Box A or Box D sales, and which have no adjustments to gain/loss, do not need to be included on a statement mailed to the IRS.

Here's how to mail your statements:

If you are e-filing your tax return, then mail your statements along with Form 8453