Hacker News Reader

Comment by lopkeny12ko | Hacker News Reader

> DO NOT FORGET TO ADJUST YOUR COST BASIS ON RSU SALES WHEN FILING TAXES

Say more? Why would I ever want to adjust my cost basis to something other than the shares' FMV at vest (which, in my experience, is always the default)?

View on HN

In some company setups, your company reports the vested shares as income on your W-2. They also report your RSUs as having a $0 cost basis. This results in being taxed twice.

E*TRADE at least provides an addendum that lets you know the adjusted cost bases to report to the IRS.

In my case this happens for RSUs and—I believe—not for ESPPs which are reported correctly out the gate.

With my (and everyone else at my companies) setup with etrade, you get a 1099, and then later an addendum with the adjusted values. Turbotax by default tells you to enter the 1099 sales, and after entering and submitting each row, you see the chance to adjust the cost basis, which you must enter manually from the addendum. Perhaps other brokerages have a more elegant setup. If you don't adjust you will be double taxed. This would likely be obvious to you if you sold a lot of shares, but if you just did some small sales, I can easily see someone accidentally double taxing themselves.

Very true for ESPP, but I haven't seen that for RSUs. Is your broker reporting the cost basis of the RSUs at $0? Otherwise why and how does the cost basis of an RSU even change?

Yes. Etrade reports the cost basis of RSUs as $0 on the 1099. You then must manually adjust the cost basis using a second schedule that shows the value of the RSU already taxed as income at the time of vesting. If you don't make this adjustment, you will be paying taxes on thousands of dollars in "gains" that aren't actually gains and have already been taxed as income.

Fidelity does the same thing. Cost basis of RSUs shows 0 on the 1099 and you get a supplemental 1099 with adjusted cost basis. If you don’t take care to use the adjusted value, you will be paying both income tax and capital gains tax on the market value at vesting, instead of just income tax as you should.

Reply on news.ycombinator.com