If You Sold RSUs This Year, Please Don't Get Double Taxed

You have a few months to prevent this.

I work with many families in Charlotte, across North Carolina, and across the country who sell their RSUs upon vesting and don't realize their custodian (Schwab, Fidelity, etc.) doesn't always report the correct cost basis on their 1099-B.

Here's How It Happens

You have 100 shares of XYZ vest on February 15, 2025 at $200/share. You immediately sell to diversify.

(100 shares × $200) = $20,000 in income, already taxed on your W-2.

Your cost basis should be $200/share because you were taxed on that amount at vesting.

The problem:

Your 1099-B comes in and reports your basis as $0.

Now that same $20,000 shows as taxable again on your tax return.

I Get It

Early in my career, I rushed through TurboTax as fast as possible. "What's my refund?" (Spoiler: never got one.)

You're busy. Spending hours combing through tax documents isn't realistic.

But this mistake is costly.

Why This Happens

Brokerage firms don't always accurately track the cost basis for RSU sales. Maybe shares were sold immediately upon vesting. Maybe you have multiple RSU vesting events throughout the year. Maybe your employer uses a third party stock plan administrator.

The custodian may default to reporting a $0 basis if they don't have complete information. They leave it to you to make the correction.

The Real Cost

Depending on your tax bracket and the amount of RSUs you sold, this error could cost you thousands or even tens of thousands of dollars. In North Carolina, you're looking at federal taxes plus state income tax on phantom income you're not actually earning. For high earners in states like California or New York, combined rates could exceed 50%.

What You Should Do

If you're a DIYer:

Double check your RSU cost basis before filing. Compare your W-2 to your 1099-B. Look for the RSU income reported on your W-2 and verify it matches the cost basis on your 1099-B for RSU sales.

Most tax software allows you to override the basis reported on your 1099-B. Make sure you document the correction. Keep your RSU documentation. Save all equity compensation statements, vesting schedules, and sale confirmations.

If you have a financial advisor:

Make sure they're actually reviewing this. Yes, many advisors just throw you in a few mutual funds, meet once a year, and charge an arm and a leg.

This is financial planning.

A competent advisor or tax professional should review all equity compensation transactions before filing, reconcile your W-2 income with 1099-B reporting, ensure proper basis adjustments are made, and document the corrections for potential IRS inquiries.

This Happens With Other Equity Compensation Too

This cost basis issue isn't limited to RSUs. Similar problems can occur with Employee Stock Purchase Plans (ESPPs), stock options, and other equity awards. Each type has unique tax treatment, and basis reporting errors are common across all of them.

Already Filed Your Taxes?

If you already filed and didn't catch this error, you can file an amended return using Form 1040-X. While this adds some hassle, it's worth it to recover the overpaid taxes. The IRS allows you to amend returns within three years of the original filing date.

The Bottom Line

Equity compensation is valuable, but it comes with tax complexity that catches many people off guard. Whether you're in Charlotte, the Triangle, or anywhere else and whether you handle your own taxes or work with a professional, reviewing RSU cost basis should be a non-negotiable part of your tax preparation.

Don't leave money on the table by paying taxes twice on the same income. You've worked hard for your equity compensation. Make sure you're not giving more of it back to the IRS than you legally owe.

This article is for informational purposes only and should not be considered tax advice. Consult with a qualified tax professional about your specific situation.

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