If you've received Restricted Stock Units (RSUs) as part of your compensation, you may have noticed something odd when tax season rolls around: your brokerage isn’t reporting the cost basis of your RSUs on Form 1099-B. This can be confusing and, if not handled correctly, may lead to overpaying on taxes.

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So, why does this happen? And what should you do about it? Let's break it down.

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Why Brokerages Don’t Report Cost Basis for RSUs

When RSUs vest, they are taxed as ordinary income. This means:

• The fair market value (FMV) of the shares on the vesting date is included in your W-2 income.
• Taxes (federal, state, Social Security, and Medicare) are withheld at vesting.
• Once vested, RSUs become your shares to hold or sell as you wish.

However, here’s where things get tricky:

• Brokerages don’t automatically track RSU cost basis because the shares are “delivered” to you, not purchased.
• The IRS only requires brokers to report the sale proceeds on Form 1099-B, but not necessarily the cost basis of RSUs.
• If the cost basis is missing or incorrectly listed as $0, it can appear that you made a 100% capital gain on the sale—even though you already paid tax on the FMV at vesting.

This could lead to double taxation if you don’t adjust the cost basis yourself.

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How to Correctly Report RSU Sales on Your Taxes

Since your brokerage may not include the correct cost basis, you need to adjust it when filing your taxes. Here's how:

1. Find Your RSU Cost Basis

• Look at your W-2 from the year the RSUs vested.
• The taxable income from RSU vesting is usually listed in Box 1 (Wages, Tips, Other Compensation) and/or in a separate line item.
• Your cost basis is the fair market value (FMV) per share on the vesting date multiplied by the number of shares vested.

2. Check Your Form 1099-B

• Your brokerage may list a cost basis of $0 or mark it as "non-covered," meaning they aren’t reporting it to the IRS.
• Compare the sale proceeds to the FMV on the vesting date to determine your actual capital gain or loss.

3. Adjust Cost Basis on Your Tax Return

• When reporting the sale in Schedule D (Capital Gains and Losses) and Form 8949, enter the correct cost basis manually.
• If your broker reported the wrong cost basis, add an adjustment in column G of Form 8949 to reflect the correct taxable amount.

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Example of Correcting RSU Cost Basis

Let’s say:

• You received 100 RSUs that vested at $50 per share.
• The FMV at vesting was $5,000, which was included in your W-2 as income.
• You sell all 100 shares later at $55 per share.
• Your brokerage reports sale proceeds as $5,500, but lists the cost basis as $0.

If you don’t adjust the cost basis, the IRS will think you made a $5,500 capital gain—which is incorrect.

Correct Calculation:

• Actual Cost Basis = $5,000 (100 shares × $50)
• Capital Gain = $5,500 - $5,000 = $500

You should adjust your tax return to reflect a $500 capital gain, not $5,500.

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Key Takeaways

• RSUs are taxed as income at vesting, but brokerages often don’t report cost basis on Form 1099-B.
• If unadjusted, it can lead to double taxation on your RSU sales.
• Always check your W-2 and manually adjust your cost basis when reporting RSU sales on Form 8949.
• If unsure, consider using tax software or consulting a tax professional.

By taking these steps, you’ll ensure you only pay tax on actual gains—not on income you already reported and paid taxes on.

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How Fyooz Financial Planning Can Help You

We do tax planning in the middle of the year for all of our clients. Therefore, as a client of Fyooz Financial Planning, you will go into your tax filing with a very good understanding of what your refund or payment will be. 

If something is off, like it was for a lot of our clients with RSUs, you will know to reach out to us to see what’s happening. That’s what our clients are doing right now! By helping them adjust their basis on their tax filing, they are potentially saving thousands of dollars and tons of time by reporting it correctly the first time. 

At Fyooz Financial Planning, we believe tax planning isn’t just something you do in April—it’s an ongoing process. That’s why we work with our clients year-round, ensuring they go into tax season with a clear understanding of what to expect.

How We Help

• Mid-Year Tax Planning: We check in with our clients throughout the year so there are no surprises come tax season.
• Identifying Issues Early: If something seems off—like an unexpectedly high tax bill—we help explain, or maybe even help fix your filing.
• Peace of Mind: With a financial planner by your side, you’ll feel confident and secure that your finances are happening the right way.

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If you want to gain confidence in your financial planning, schedule a free 15-minute consultation with us today. Let’s make sure your taxes—and your finances—are working for you, not against you.

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Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.