Help Reporting RSUs on Taxes

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davidlukewilcox
Posts: 117
Joined: Sat Dec 24, 2011 1:44 am

Help Reporting RSUs on Taxes

Post by davidlukewilcox »

Hi,

I have a question on what I'm supposed to do with RSUs on my taxes. In 2012, I sold some RSUs. When I did my taxes, ETrade had nothing in the "Cost Basis" column. That made me think, "Oh. These shares were *given* to me, so the cost is zero." So, I put that as my cost basis. After looking at my W2 a bit more, I'm pretty sure that the RSUs showed up on my W2 and that I was taxed for them there. That means that I already paid taxes for my RSUs and that they are already considered income. That means that my cost basis is more than zero.

Is this how RSUs are normally done? Why would ETrade report my cost basis as zero? Am I supposed to figure out my own cost basis when dealing with RSUs? I could by looking at how much I was taxed when they were given to me. But, it's way easier when the cost basis is just right there on my tax form.

At this point, should I file an amended return? The RSUs were probably worth about $6000, so I probably overpaid my taxes by $1000-$1500.
Retread
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Location: Southwest Florida

Re: Help Reporting RSUs on Taxes

Post by Retread »

Yes, absolutely.
Bruce
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HouseStark
Posts: 324
Joined: Mon Oct 15, 2012 2:31 pm
Location: Minneapolis, MN

Re: Help Reporting RSUs on Taxes

Post by HouseStark »

davidlukewilcox wrote:Hi,

I have a question on what I'm supposed to do with RSUs on my taxes. In 2012, I sold some RSUs. When I did my taxes, ETrade had nothing in the "Cost Basis" column. That made me think, "Oh. These shares were *given* to me, so the cost is zero." So, I put that as my cost basis. After looking at my W2 a bit more, I'm pretty sure that the RSUs showed up on my W2 and that I was taxed for them there. That means that I already paid taxes for my RSUs and that they are already considered income. That means that my cost basis is more than zero.

Is this how RSUs are normally done? Why would ETrade report my cost basis as zero? Am I supposed to figure out my own cost basis when dealing with RSUs? I could by looking at how much I was taxed when they were given to me. But, it's way easier when the cost basis is just right there on my tax form.

At this point, should I file an amended return? The RSUs were probably worth about $6000, so I probably overpaid my taxes by $1000-$1500.
E-Trade either didn't have the basis information for those shares and/or wasn't required to report the basis because those shares were considered to be "non-covered" shares. At this point, that doesn't matter any more. You will want to get your return corrected to reflect the proper amount of gain on your sale. When people are issued restricted shares and the restrictions lapse on those shares, meaning the shares are now fully owned without restriction by the recipient, the employer is responsible for including the FMV of those shares in the taxable income of the employee. That transaction would often also include the sale of any shares to cover the tax withholding requirement incurred. Those amounts should all properly be included in your W-2, so there shouldn't have been any issue there. The error is likely limited to the basis reported on the later sale of your RSUs. Usually, an employee will receive some sort of report documenting the transaction when you received the shares. You should be able to discern from that statement what the FMV of the shares at that time. That value per share should have been the basis of the shares you sold. You could also look at the monthly statement for E-Trade when the shares were first received in the account. That should also reflect the value of the shares at the time of lapse, or pretty close to it.

You need to complete a 1040X amended return. Include with the 1040X any of the other parts of the return that are being changed. In this case that would be the Form 8949 and the Schedule D, at a minimum. It's possible other parts of the return could be effected, such as Schedule A Itemized Deductions or Form 6251 Alternative Minimum Tax. This the sort of return where using software really comes in handy, if you want to do it yourself.
HouseStark
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Re: Help Reporting RSUs on Taxes

Post by HouseStark »

You don't mention whether you have a state income tax, but that would likely be subject to amendment which would also produce a refund.
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mhc
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Re: Help Reporting RSUs on Taxes

Post by mhc »

RSU's should be easy.

The day that the RSU's vest you receive the stock. The difference between the fair market value (FMV) on the day they vest and the cost basis ($0) is taxed as normal income. Did you do a cashless exchange? If so, some of the share were withheld to pay the taxes. All this shows up on the W-2. You don't have to do anything.

Whatever stock that is leftover is yours with a cost basis of the FMV of the day the stocks vested. When you sell the shares, it is a normal stock sell. You will have to report the cap gains. My company sends me a form that reports the FMV. The brokerage tells me the sale price minus commission.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
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