You vested a big chunk of RSUs last year. Your employer withheld shares to cover taxes. You sold what was left, pocketed some cash, and moved on. Now you're filing — and TurboTax is calculating a $70,000 capital gain on a sale that was maybe $3,000 above what actually landed in your bank account. The cost basis on your 1099-B shows $0 per share.
You're not imagining it. This is the single biggest tax-filing trap for anyone paid in equity. And it's not a bug in TurboTax — it's a specific IRS rule that blocks brokers from including your RSU compensation income in the cost basis they report. The result is that every RSU sale looks, on paper, like you made an enormous profit. If you file without fixing it, you'll end up paying tax on the same income twice: once through your W-2 withholding, and again as a capital gain.
This post walks through exactly why this happens, how to find your real cost basis, and how to enter the adjustment in TurboTax without getting flagged. It takes about ten minutes once you know what to look for.
Why Your 1099-B Shows $0 Cost Basis on RSUs
Before 2014, brokers were allowed to report a "full" cost basis for RSU sales that included the value of the shares at vest (which was already taxed as ordinary income on your W-2). That created a cleaner filing experience but sometimes led to incorrect reporting.
In 2014, the IRS changed the rule. Under the new regulation, brokers handling employer stock plan sales can only report the portion of cost basis that the employee actually paid — not the compensation income. For RSUs, the compensation income is the entire value at vesting, because you didn't pay anything for the shares. That means the reportable cost basis is $0.
This is why your 1099-B shows cost basis of $0 or blank for RSU sales. It's not technically wrong — it's the IRS-required reporting. But it's incomplete. Your actual cost basis (the number you should use for capital gains calculation) is the fair market value of the shares on the day they vested — the same amount that showed up in Box 1 of your W-2 as compensation income.
If you enter the 1099-B cost basis of $0 without adjusting it, TurboTax treats the entire proceeds as a capital gain. You'd be paying ordinary income tax on the vesting (already withheld via your W-2) and capital gains tax on the same dollars.
How to Find Your Real (Adjusted) Cost Basis
The adjusted cost basis for an RSU sale is simple in principle:
Fair market value at vest × number of shares sold
This number lives in several places — you'll usually find at least one:
Your broker's "supplemental" tax statement. Schwab, Fidelity, E*TRADE, and Morgan Stanley all issue a separate document alongside the 1099-B that shows the adjusted cost basis for stock plan sales. At Schwab it's called the Equity Awards Center supplement. At Fidelity it's the Stock Plan Services supplement. At E*TRADE / Morgan Stanley it's the Stock Plan Transactions Supplement. Download it. This is the number you want.
Your W-2. Box 14 often includes a line like "RSU" with the amount that was added to Box 1 compensation income. That total is your aggregate adjusted cost basis for all shares that vested that year (before any sell-to-cover withholding).
Your equity plan portal. Inside Schwab Equity Awards Center, Fidelity NetBenefits, E*TRADE Stock Plan, or Morgan Stanley at Work, there's a "vesting history" or "lot history" view that shows the per-share FMV on each vest date.
The number to plug in is the per-share FMV at vest × shares sold from that lot. If you sold 100 shares from a lot that vested at $82 per share, your adjusted cost basis is $8,200. Enter that in place of the $0 that was imported.
Entering the Adjustment in TurboTax
The steps depend on whether you imported from your broker or are entering manually.
If you imported:
- After the import, navigate to the specific RSU sale transaction
- Click Edit next to the row
- On the details screen, check the box that says "The cost basis is incorrect or missing on my 1099-B"
- Select "I know my cost basis and need to make an adjustment"
- Enter your adjusted cost basis (from the supplement or W-2)
- TurboTax automatically adds Code B to Form 8949 column (f) to flag the adjustment
If you're entering manually:
- Enter the 1099-B as usual with the sales category, dates, and proceeds
- In the cost basis field, enter your adjusted cost basis directly — not the $0 the broker reported
- Check the "cost basis is incorrect" box and select the adjustment reason
Do not enter the adjustment by modifying the proceeds or adding a negative gain — those approaches trigger review flags and can lead to IRS notices.
Where Each Broker Buries the Supplement
The supplemental cost basis document is named differently at every broker, and it's never on the first page of your tax documents folder. Here's where to look:
- Charles Schwab Equity Awards: Log into schwab.com, go to Accounts → Tax Center → Documents. Look for "Stock Plan Supplemental Information" — it's a separate PDF next to the 1099-B.
- Fidelity Stock Plan Services: fidelity.com → Accounts & Trade → Tax Documents → Stock Plan. The document is labeled "Supplemental Stock Plan Lot Detail".
- E*TRADE from Morgan Stanley: us.etrade.com → At Work → Stock Plan → Tax Documents. Look for "Stock Plan Transactions Supplement".
- Morgan Stanley at Work (Shareworks/EquatePlus): Depending on which legacy system your employer uses, this varies. Check the Tax Documents or Reports section. Look for anything labeled "supplement" or "cost basis worksheet".
- Carta / Pulley (for private-company RSUs): These platforms typically issue a consolidated statement with adjusted basis already calculated.
If you can't find it, your HR or stock administration team can email it to you — it's a standard request during tax season.
Common Mistakes That Trigger IRS Audits
Four things to avoid:
- Adjusting proceeds instead of cost basis. Always change the cost basis field and flag the adjustment. If you modify proceeds, it won't match what your broker reports to the IRS, and you'll get a CP2000 notice.
- Using your sell-to-cover net proceeds as cost basis. Net proceeds and cost basis are different things. Cost basis is always FMV at vest × shares, not what landed in your bank account.
- Forgetting about shares withheld for taxes. If 40% of your vested shares were withheld to cover taxes, you only sold 60% of the vest. Your adjusted basis is only for those 60%, not the full vest amount.
- Using the current share price instead of the vest-date FMV. Cost basis is always the price on the day the shares vested, not the day you sold them or the day you're filing.
FAQ
My 1099-B shows a small cost basis (not exactly $0) — should I still adjust it?
Check against your broker supplement. Some brokers report the tax-withholding portion as cost basis, which gives a small but incomplete number. The correct adjustment is the full FMV at vest, not the withholding-adjusted amount.
What if my company uses a private-stock administrator like Carta?
Same rule applies — the adjusted cost basis equals FMV at vest × shares sold. Carta and Pulley generate tax statements that show this directly. If you're selling in a secondary transaction, there's usually no 1099-B at all and you report the sale as a manual entry on Form 8949.
I sold RSUs from multiple vest dates in one trade. Do I need separate entries?
Technically yes — each vest date has its own cost basis. TurboTax lets you split a single 1099-B row into multiple entries. In practice, most people combine them and use the weighted-average FMV; the IRS generally accepts this when the total reported basis is correct.
What about ESPP shares — same rules?
Similar but not identical. ESPP has additional complications around qualifying and disqualifying dispositions. See our separate guide on ESPP cost basis adjustments.
Will the IRS question my adjustment?
Not if you've documented it correctly. Code B on Form 8949 column (f) is the IRS-blessed way to flag an adjusted cost basis. Keep a copy of your broker supplemental statement in case you get a correspondence audit.
Can a 1099-B converter handle RSU adjustments?
A good converter extracts what's on your 1099-B PDF. The adjustment comes from a different document (the supplemental statement), so you usually need to apply it in your tax software after import. Some converters let you paste in adjusted basis from the supplement — verify this capability before relying on it.
Bottom Line
A $0 cost basis on your RSU 1099-B isn't a broker error — it's the IRS rule. But if you enter it as-is, you'll pay tax on income you already paid tax on. The fix takes ten minutes: find your broker's supplemental statement, enter the adjusted cost basis in TurboTax, check the "cost basis incorrect" box, and the adjustment flows through Form 8949 automatically.
For large vest years, this single adjustment can save tens of thousands of dollars in over-taxation. Don't skip it.
Dealing with a messy 1099-B on top of RSU adjustments? Try 1099-B Converter free — upload your brokerage PDF, get a clean CSV or TXF with every transaction extracted, and apply your RSU adjustments cleanly in TurboTax or TaxAct.