Restricted Stock Units (RSU) and TurboTax: Net Issuance

One of the most popular posts on my blog is one I wrote four years ago about reporting tax on RSU. Although I try to do the best I can in deconstructing it, I still get many questions about it every year at tax time.

It’s a difficult topic because there can be many variations. Employers issuing the RSUs don’t help because they are afraid of liabilities. They just say "consult your tax advisor" as if everyone has one. Tax software doesn’t make it easy either. Although there are many variations, the software tends to go by just one. If your situation fits it, you may be able to muddle through. If it doesn’t, the software confuses you more than it helps you because your situation doesn’t match what it thinks you have.

For the longest time I only addressed the issue generically. I refused to work as free tech support for the software companies. If you paid for the software, they should help you with how to use it. Now I give up. I realize people are looking for step-by-step help and the software companies aren’t providing it. Although this may be a little late for this year, there is always next year.

The following is a sequence of screenshots taken from TurboTax Online Premier edition. If you use the installed software or a different edition, your screens may be different but similar. I show TurboTax only because it has the largest market share.

In this post I will start with the most straight-forward case: Net Issuance. It’s probably the most common. It’s also a case TurboTax handles relatively well. I may do other variations in future posts.

In Net Issuance, the employer withholds a number of shares for taxes and gives the employee the remainder. For example suppose you have 100 shares vested but you only receive 60. You just don’t see the other 40 shares. The employer doesn’t use a broker to sell the 40 shares for taxes. It just keeps the 40 shares and puts some numbers on your W-2.

Let’s get started.

Start from Tools on the top right, under the running meter.

Click on Topic Search.

Here comes the first challenge. You won’t find RSU or Restricted Stock Units. Type "employee stock" in the search box and find "employee stock plans" in the list. Click on Go.

From the topic list, you will jump to this screen. It still says Employee stock plans, not RSU. Take a look at the More Info link before you click on Yes.

Now it shows Restricted Stock Units (RSU) as a part of Employee Stock Plans.

The next screen asks you if you sold stocks from RSU. Click on Yes if you sold. If you didn’t sell, don’t enter anything. Wait until you sold those shares you received from your RSUs.

This is just a note about some changes from the IRS. Nothing to do here.

Here TurboTax asks you if you want to take the longer, more difficult, mis-named EasyGuide or the shorter, easier way to just enter on a spreadsheet. If you enjoy the ride, let’s first take the EasyGuide recommended by TurboTax. Later you will see how easy it is with the spreadsheet.

EasyGuide

Restricted Stock Units (RSU) is listed in the middle. Choose that.

The name of the employer comes from the W-2 you entered earlier in TurboTax.

A list of things you need. Click on "See an example" for the example we will use.

Here’s the example we will use.

Vesting/Release date 2/12/2011
Vested shares 160
Closing price on vesting date $51.61 per share
Number of shares withheld for taxes 63
Number of shares issued to the employee 97
Date sold 2/20/2011
Shares sold 97
Selling price $51.07 per share
Net proceeds after commission $4,933.76

On my 1099-B, Box 6 is checked and Box 8 is blank.

It does some math and then asks you about your sales expenses. Use your net proceeds number to back into the number it wants. $4,953.79 – $4,933.76 = $20.03. Why doesn’t it just ask about the net proceeds number you have on your 1099-B?

After you do the math, it shows you that your math is correct.

My 1099-B does not show a cost basis.

It’s asking you whether you sold the shares from one lot or multiple lots. We will take the simple case of one grant lot. Click on the Explain This link if you want to know more about grant lots.

But it’s talking about exercising stock options and purchasing shares. You are given RSUs. Are you confused yet?

Enter vesting information.

No splits to keep it simple.

No reinvested dividends either, to keep it simple. If you had either splits or reinvested dividends, it’s going to be more complicated.

Now it’s showing a short-term loss because the value of the shares was $51.61 per share when they were vested and the shares were sold at $51.07 per share less commission and fees. Click on the View Details button.

It explains how the numbers are calculated. $4,933.76 is the number from 1099-B. $5,006.17 is value at vesting ($51.61 per share times 97 shares). The difference is a $72.41 loss. Click on the Explain This link about compensation income.

You get this popup. So far so good.

We are done with this sale. Rinse and repeat if you have another sale.

After you are done with all investment sales, TurboTax wants to double check the value of the vested RSUs are included on your W-2. Say yes and make the numbers match.

Now do you want to see how easy it is to enter the RSU sale on a spreadsheet?

Enter On a Spreadsheet

From the "How Do Your Want to Enter Your Investment Sales" screen, choose Enter on a Spreadsheet.

Enter these

Column Value Explanation
Description 97 XYZ Corp Number of shares you sold
Date Sold 2/20/2011  
Net Proceeds 4,933.76 From 1099-B
Cost Basis 5,006.17 97 shares @ $51.61, price per share on vesting date
Reported on a 1099-B Statement B = Yes, WITHOUT basis reported to IRS Match 1099-B

Now TurboTax offers a review. OK, we go along with it.

It was stock.

No special situations.

It’s looking for wash sales. Answer the question truthfully.

We arrive at the same investment sale summary. This is so much faster than the EasyGuide!

This should convince you that you should not use the EasyGuide to enter RSU sales. The spreadsheet method is much easier to use and understand.

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Comments

  1. Claudia says

    This was a great post. Thank you. Thank you. Thank you. Not your job, not your responsibility. I totally get that. So appreciate the guidance. Great job on paying it forward. Great reminder to do the same. Thanks. :)C

  2. bill iommi says

    What happens when you are awarded the RSUs and the company goes out of business before the grant. The compensation was added to the W-2 during the year it was granted. Can I claim the value of the grant to offset any capital gains from other sales?

  3. says

    bill iommi – I’m not clear what you meant by “before the grant.” The series of events as I understand them are: (1) Grant. This is when the company tells you they will give you X number of RSUs to be vested over the next Y years. (2) Vest or Release. This is when you hit a milestone and a % of the RSUs become really yours. It’s also when the value of the shares vested or released is added to your W-2 as compensation. (3) Sell. This is when you sell the shares you received. So when does the company go out of business? Before grant, you have nothing. Before vest, you don’t have any compensation added to your W-2 and you’ve lost nothing. Before you sell, too bad. You can declare the shares as worthless and claim a loss.

  4. gary says

    My company stock plan is administered through e-trade. Which has sent me all my tax related events in the form of 1099-INT and 1099-B. This year, I made taxable events w/r/t NQSO, ESPP, ISO (disqualified) and RSU.
    While using turbotax premium in the interest income section, I downloaded both forms (1099-INT, 1099-B) from e-trade. My question is: Since my company administered stock plan activity is now in turbotax in the form of the corresponding 1099′s am I finished with inputting all information w/r/t the stock plan or do i need to open these sections (employee stock plan) within turbotax? thanks in advance.

  5. says

    gary – You still need to open those sections. The 1099-B’s I received from E*Trade had basis for some shares I sold but not others. You still need to look at each one and fill in the blanks.

  6. Rachel says

    Thank you so much for going through this. My RSU situation was different, as the employer didn’t hold back the stock separately for taxes. With the broker, I selected either “sell-to-cover” or “same-day-sale” to just cover the taxes or to sell the whole lot. Turbo Tax was even less friendly with this scenario. I look forward to additional blogs on this specific topic.

    Even though you post wasn’t specific to my situation, I was LOL when I read some of your comments about the bizarre TT logic. (e.g. back calculating the fees from the numbers, then TT recalculating the math I just did. I went through this about a dozen times as I checked and rechecked my numbers, so this was near and dear to my heart.)

    Thanks for the help and the laughs! And let us know as you expand blog posts on RSUs!!!

  7. Nicole says

    After 2 nights of being on the phone and getting no where with E*Trade, I finally have clarity. Thank you so much!!!

  8. Emily says

    Thank you so much for your post. Your post is more helpful than any of the supports TT provides.

    This is really great but I do have a really basic question. My situation is more simple than your sample case. I had number of RSUs vested monthly but I didn’t sell any of the shares in 2012. Now I have 1099-B Proceeds From Broker and Barter Exchange Transactions 2012 for the Sell-to-Cover Transactions.

    If I follow your step-by-step tutorial, on “Enter Your Sale Information” screen, what would I enter for Date Sold, No. of Shares Sold and Selling Price Per Share? Or I don’t have to enter any of the vested shares on 1099-B since I didn’t have any actual gain/loss?

  9. Ram says

    Thanks a lot for your post. I am not sure if this is a right place to post. If not please let me know where to post the following question.

    Question:
    I received “statement of taxable income” from my employer for 166 shares which got vested on November 9th 2012. The total W-2 Income was also included in there. I didn’t place(sell or buy) any trade in 2012, so I didn’t receive any 1099 form from Etrade (I confirmed this etrade also). I paid my taxes(during vesting period) through my account instead of paying through stocks.

    Should I report this “statement of taxable income ” when I am filing tax this year? If so can I use turbo tax to do it. Any suggestions would be of great help.

  10. says

    Ram – If you paid cash for the taxes and kept all the shares, you don’t have to report until you sell the shares. Keep the “statement of taxable income” until you sell the shares. It will remind you the price per share you paid for the shares.

  11. Ricky says

    How do i report RSU? I know it’s been included as part of my wages, because it was stated on the details of my W2 but my question is.. do i still need to report on Schedule D, since this is not a sale? I did not receive 1099-B either. If I’m going to report to Sched D do I need to report the cost same as proceeds to come out with zero loss/gain, to reconcile what was reported on my W2? Any suggestions would be appreciated.

  12. Matt says

    I have exactly the same question as Emily above:

    I had number of RSUs vested monthly but I didn’t sell any of the shares in 2012. Now I have 1099-B Proceeds From Broker and Barter Exchange Transactions 2012 for the Sell-to-Cover Transactions.
    If I follow your step-by-step tutorial, on “Enter Your Sale Information” screen, what would I enter for Date Sold, No. of Shares Sold and Selling Price Per Share? Or I don’t have to enter any of the vested shares on 1099-B since I didn’t have any actual gain/loss?

    thanks

  13. says

    Matt, Emily – If you received 1099-B for sell to cover, your employer isn’t doing net issuance, which this article is focused on. You enter each sale as shown on the 1099-B. Your basis is the price per share on vesting date * # of shares sold to cover taxes. Any small difference in price and brokerage commission is your gain/loss. Do this for each entry on the 1099-B.

  14. Geetha says

    This is great information – THANK YOU!!! I have 2 questions

    I have a situation where a total of 326 RSUs from 3 different grants vested Sept 2011 (employer withheld 135 shares for tax and distributed 191 shares to me) .

    I ended up selling all these 191 shares on Jan 9 2012.

    1) The above example you have walked through assumes shares vested & sold in same year . Since in my case the shares vested and were sold in different years- do I need to do anything different?

    2) to make matters more confusing, the RSU reported in my W2 this year is completely different & quite larger sum compared to what I earned from the sale above (this is because I had another batch of shares from these grants vest in 2012 …and the employer reported that amount in my W2) —>so for the step where “TurboTax wants to double check the value of the vested RSUs are included on my W-2″ do I say No? (i said yes,but Turbo tax keeps giving error since numbers don’t match)

    Many thanks for your reply

  15. says

    Geetha – Just bypass Easy Guide and go directly to Enter On a Spreadsheet. Follow the example there. You will avoid all the problems.

  16. Confusedfiler says

    Great information. Next time, I’ll just buy the basic Turbotax!
    If we have several sell to cover transactions, actual RSU sales from previous years’ vests , some same day as vest sales as well as ESPP sales throughout the year and two ESPP purchases during the year, and most of all of these result in losses , can we apply wash sale rules across all of them since they’re all in the same underlying stock?
    If yes, how many times within a tax year can this be done?
    Are two consecutive sell to cover for taxes resulting in a loss within 30 days of each other considered a wash sale if there are no other transactions in the stock in those 30 days?

    Thanks

  17. Steve says

    Thanks for this post. I’m still not clear on what to do if I vested in a grant, but did not sell the shares. Turbotax flags a delta between what is reported on my W2, and what it computes. The delta is exactly the amount of the two vestings that I did not sell. I don’t see a path to enter a vest with no sale, nor one that would allow me, in a following year, to enter a sale without a vest.

  18. says

    Steve – You don’t have to enter anything for the shares you didn’t sell. Use the “Enter on a Spreadsheet” path to enter the shares you sold.

  19. says

    This tutorial was really helpful. Thank you so much for taking the time to do it since Intuit’s help is so lacking.

    I do have one follow up (very basic) question.
    In your example above, on the person’s 1099-B if they have both the sell-to-cover of 63 shares and the subsequent selling of the 97 shares listed as separate line items, does that mean they should go through the RSU wizard twice?
    Or does simply going through the wizard once and explaining on the “Vesting Release” screen that 63 shares were sold to cover taxes sufficient? Will that give a mismatch of items between what’s on your taxes and what’s on your 1099-B?

    Or does that mean my employer doesn’t do Net Issuance and I should flee the country since I don’t know how to get that into turbotax correctly?

    Thanks so much for your help. I’m was going crazy until I found your post :) You need a donation button on this post.

  20. says

    John – If you have the sell-to-cover shares listed on 1099-B separately, it means your employer doesn’t do Net Issuance. If you followed the article to the end, you realize you should just skip the Easy Guide and jump right into Enter On a Spreadsheet. There, you make two entries: one for the 63 shares, another for the 97 shares. I already showed you how to do the 97 shares. You do it the same way for the 63 shares with the numbers on your 1099-B.

  21. Mo says

    I have RSUs vested during 2012. I did not sell any. Employer deducted shares to withhold tax on eTrade. On my W2, the RSU income is added to my wages but i was NOT deducted any tax from my paycheck.

    How do I tell turbotax that tax has been withheld since I have less sellable shares since employer already withheld taxes?

  22. Mo says

    Thanks for the reply Harry. I am confused though. Since the wage is reported on my w2, I have to pay taxes on it. Which is fine. But I have less sellable shares since tax was deducted. Will the remaining vested shares become sellable once I pay the tax?

  23. says

    You employer already added the value of the shares it deducted as tax withholding on your W-2. It’s all taken of. The remaining shares are yours to keep or sell. Your cost basis in each share is the price per share at the time of vesting. If the price goes up from there, you get capital gains. It’s just as if you got a cash bonus and you used the after-tax bonus to buy shares on that day.

  24. Steve says

    Hi Harry – I’m still stuck. My employer entered a value on my W2 that INCLUDES the income from the shares that I did NOT sell. Turbo Tax only calculates the tax on the lots that I entered that I sold. There is a delta, which is exactly the value of the grants that I did not sell. It won’t let me complete my return. Can you enlighten me as to what I’m doing wrong?

    Thanks for your help.

  25. says

    Steve – Where did you tell TurboTax about the grants that you did not sell? How did it know the portion on W-2 that came from grants you didn’t sell versus just a cash bonus? If that’s why it won’t let you complete your return, delete that part. It doesn’t need to know. As I wrote in comment #19 above, use “Enter On a Spreadsheet” and only enter the grants you actually sold.

  26. Andy says

    This was a great post. Thank you. Thank you. Thank you. I can’t thank you enough for all your posts about RSU.

  27. Ian Varley says

    Oh man, thank you for this. Injecting some sanity into this needlessly complicated and misleading process was exactly what I needed.

  28. A-train says

    This was super helpful! 1st time i’ve had to do anything w/ RSU’s and following your advise & using the spreadsheet method was a breeze! THANK YOU!

  29. Barbara says

    So far this is the only place on-line where I’ve been able to hit the exact topic on which I’m stuck. If I held onto all of my RSUs vested (net of those sold for taxes), then I don’t need to report the transaction at all as a sale of an employee stock plan (specifically RSU)? If I choose this approach, I end up with a huge tax bill equal to the amount of the tax withholdings on the RSUs vested and sold for taxes. This doesn’t seem right to me!

  30. says

    Barbara – It depends whether the shares sold for taxes appear on a 1099-B or not. This article deals with Net Issuance, i.e. no 1099-B. See comment #21 above if the shares sold for taxes are reported on a 1099-B. See comment #29 above if somehow TurboTax thinks you sold but you didn’t. Ask where TurboTax got the idea you had any RSUs to begin with. If it got from W-2 box 14, delete it.

  31. Barbara says

    Hi Harry – Thanks for your help…just tipped you for it! Comment #21 is for 2 transactions – the sell-to-cover taxes and the sale of the rest of the shares. I didn’t sell any shares; the broker did sell some on my behalf to cover taxes. So do I still report the sell-to-cover taxes shares in TurboTax as sold just like you would report the 97 shares in your example? That seems to make sense to me (and helps my tax bill), but then you wrote in comment #25 that if you didn’t sell anything, don’t do anything (meaning don’t report anything at all on the stock front?). I didn’t sell anything; the broker did though to pay for taxes (presumably as instructed by my employer). I’m still confused as to whether I should do nothing (other than enter the W-2 info. which includes both the income for all RSUs vested and taxes for RSUs sold-to-cover) or enter the W-2 info AND the sale in the investments section for the sell-to-cover transaction. I really appreciate your time.
    Barb

  32. says

    Barbara – It all depends on whether the shares sold for taxes are reported on a 1099-B from a broker or not. If they are, you enter them, the same way as the 97 shares in the example. If they are not reported on a 1099-B (only on W-2), then you don’t.

  33. Sue says

    I did not upgrade to Premier turbo tax, but believe I am following this helpful conversation – please confirm. I received 50 RSU’s on 12/10 DEU 1.46. Vest detail shows grant price $0, Fair Market Value=$14.16 x 17 units vested = $240.72. W2 shows $240.72 as RSU. 6 units were withheld for taxes @ $14.16 (or $84.96), The $84.96 shows on my W2 as Restrict Stock tax offset ($71.36 Fed WH, $3.49 Fed MedEE, $10.11 OASDI/EE) I did NOT get a 1099 for this sale – so I entered $84.96 as the sales proceed and $84.96 as the cost basis which calculated a $0 gain/loss. Correct?

  34. says

    Sue – If you kept the remaining shares, you can either do that ($0 gain/loss) or just do nothing because you didn’t receive a 1099-B for the shares sold for taxes.

  35. David says

    Harry – if you don’t sell the remaining RSUs from an Net Issuance until the following year, does it matter if you record them as an “RSU” sale or just a “Stock” sale in TurboTax? I usually move the remaining shares into a different broker account and then sell them when I need the money or want to invest them different. TurboTax pulls the data automatically from the broker so it is assumed to be just a standard “stock” sale.

  36. says

    David – Just a standard stock sale but you will have to remember the basis (price per share at vesting). Your new broker won’t have that. Sometimes your old broker doesn’t report basis either.

  37. Nick says

    I’m using TurboTax Home & Business 2013. For year 2013, I can’t find the same screen as 2012 for ESPP and RSU. Where are they???

  38. Scott says

    I could not find how to enter RSUs in TT deluxe, I had to upgrade to Premier.

    At the Investment income section and answer the first couple questions that you will type in the info yourself. At the financial institution pull down select the “no financial institution” selection. (you can edit this later)

    You are now at the Enter Other Sales screen. Type in a description and under that check the “Add more details” box. Then click the start button to the right. This will take you to a screen where you can select Restricted Stock Units.

    You can then type in all the info for the RSUs.

  39. Nick says

    Thank you so much, Scott! “Add more details” that is. I’m using TT Home & Business but it is the same as Premier for RSU and other stock transaction. You saved my day.

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