Personal Finance & Money Asked by Totoy Laki on July 9, 2021
Block 14 of my W2 says $40,000 RSU. My paystub itemized the $15,000 tax deductions (fed, state, SSA, etc..). Out of the remaining $25,000, twenty thousand dollars were deposited to my E-Trade account, kept it there and did not sell. The remaining $5,000, although I did not receive, was added to my total income and taxes deducted from it. Will my cost basis be $25,000 so that the $5,000 will be deducted from my total income.
Further explanation:
My employer sold 400 shares of company stock @ $100 per share ($40,000 total) and paid to me as my year’s RSU indicated at block 14 of my W2 form. Fifteen thousand dollar taxes were deducted from the $40K as indicated by my paystub. Out of the remaining $25,000, two hundred shares of company stock at $100 per share ($20,000 total) were deposited to my E-Trade account (I kept it invested and did not sell). The rest, $5,000, which is part of my year’s income and paid taxes to it was unaccounted for. My 1099-B from E-trade says the cost basis is 0. You were right that if I put cost basis as 0, I will be double taxed. However, if I put my cost basis as $20,000, what happened to the unaccounted $5,000. To me it make sense to put $25,000 as my cost basis because that’s how much it cost to get my vested $20,000 RSU. It also resolved the question about the $5,000 shortfall.
I asked my payroll as some of you suggested but I was told to ask E-trade or hire a tax professional. E-trade does not know what the cost basis was that’s why they put 0. I have been doing my taxes since I started working and it pains me to think that I can’t solve what seems to me a minor problem that I might need a tax professional to do what I have been doing for quite a while (That’s my pride talking) I might need their help this time around. However, besides my math was wrong, talk to my employer or ask e-trade, is there any other answer there? Appreciate your help.
Found it!
To all those good people who tried to help, I found the answer. I followed the advice of my peers and searched all the documents I can get from my E-Trade account. I found the "Stock Plan Transaction Supplement" that has a column that says "adjusted cost basis" of $19,900. The form still says $0 on its "cost basis’ column just like the 1099-B but with a "adjusted cost basis" column that the 1099-B lacks. I cancelled my appointment to a tax accountant and filed my return myself. I felt marvelous. Thank you all for your efforts.
BTW, I rounded up all the numbers so as not to confuse. The missing $5,000? It wasn’t, It is on my W-2 and paystub, which means it was paid to me.
Your math doesn't add up (where is this $5,000 that you didn't receive?) but the cost basis for the shares you received (if taxes were withheld, which it sounds like they were) should be the price of those shares at the time you received them. 1099's often don't record the original price, so it's up to you to look up the price you received them at. The broker site may list this, or you can just look at the price history for the stock and find the closing price on that day. It should be "close enough" unless there was a massive swing that day. I've done this for all of my RSUs and have never had a problem.
Put simply, your "income" for the RSUs was $40,000 - taxes were withheld from this $40,000, so the only tax you owe is the gain on the shares you received after taxes.
If you use 0 as the cost basis, then you're paying tax on the entire amount again, not just the gains, which is what you should be liable for.
Based on your update, I would say your cost basis is $20,000 since in the end you received 2,000 shares @ $100/share. That doesn't account for the $5,000, though - I'd ask your payroll department about that. Seems like you should be owed what's left of the 5k after taxes were withheld...
Answered by D Stanley on July 9, 2021
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