Employee stock basis
RSU Cost Basis and Form 1099-B: Avoid Double-Counting Income
Learn why employee-stock basis on Form 1099-B may need adjustment and how to reconcile RSU or option income with W-2, payroll, and broker records.
Direct answer
When RSU shares settle, the value included in W-2 compensation generally contributes to the shares' basis. A later sale is measured against adjusted basis. Broker reporting does not always include all compensation previously recognized for employee stock, so using Form 1099-B without reconciliation can overstate capital gain and make the return appear to tax the same economic income twice.
The decisions to put on one timeline
Match shares to the award
Connect each sale lot to its vest, settlement, exercise, or purchase record.
Identify compensation income
Reconcile W-2 and payroll records to the amount included as wages for the shares acquired.
Calculate adjusted basis
Add amounts required by the applicable award rules and preserve separate AMT basis for ISO shares when relevant.
Report the sale consistently
Compare the broker statement, Form 1099-B, Form 8949, Schedule D, and any AMT adjustment.
Zero broker basis can overstate gain
RSU shares worth $80,000 at settlement are included in W-2 wages and later sold for $84,000. If the broker reports zero basis and no adjustment is made, the return could show an $84,000 gain instead of the economic $4,000 gain before transaction costs.
Simplified illustration. Actual basis depends on the award, payroll reporting, share withholding, adjustments, and sale records.
What planning examines
W-2 and payroll reconciliation
Grant-to-sale lot matching
Regular and AMT basis reconstruction
Form 1099-B and Form 8949 review
What you receive
The work product should turn tax analysis into specific decisions, dates, and records that can be implemented.
Frequently asked questions
Why would a broker omit compensation from basis?
IRS reporting rules can limit the compensation component included in broker-reported basis for employee stock. Taxpayers may need to determine and report the correct adjusted basis separately.
Does sell-to-cover change the basis of remaining RSU shares?
The settlement records should be used to allocate shares and basis. Shares sold for withholding and shares retained are separate dispositions or holdings that must be reconciled to the total award.
Do ISO shares need another basis schedule?
They may. ISO shares can have both regular basis and AMT basis, so a later sale may require calculations under both systems.
Continue with a related guide
RSU Withholding Shortfall
Understand RSU withholding shortfalls, sell-to-cover, W-2 income, supplemental wage withholding, and how to estimate the cash needed for tax.
Read the guideTax Lot and Specific Identification
Learn how tax-lot selection, FIFO, specific identification, basis, holding period, and AMT basis can change the tax result of a company-stock sale.
Read the guideAMT Credit and Form 8801
Understand how prior-year minimum tax credit from an ISO exercise is tracked on Form 8801 and why selling shares does not guarantee an immediate refund.
Read the guideNeed a complete tax projection?
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