Tax year 2026 · Last updated June 7, 2026
The biggest tax-prep mistake in equity comp: letting your broker's $0 cost basis stand on an RSU sale. The IRS won't refund the overpayment for you — you have to catch it.
Maya, a software engineer in San Francisco, almost did. She caught it on a hunch.
The fix took 60 seconds and saved her $1,215 on this one 100-share sale — up to $2,574 in the worst case where her software had also taxed it at the wrong rate — plus more from amending an old return.
Who Maya is and what she sold
- 29 years old. Software engineer at a Series C startup in San Francisco.
- Single. W-2 base: $185k. RSU comp: ~$95k/year. Total: ~$280k.
- California resident. Federal marginal bracket: 32%. California marginal: 9.3%.
- On April 15, 2024: 100 RSU shares vested at $50/share. FMV at vest: $5,000. This was added to her W-2 Box 1 as ordinary income — federal supplemental withholding (22%) + California supplemental (10.23%) was withheld at vest.
- On September 1, 2025: she sold all 100 shares at $80/share. Sale proceeds: $8,000.
- September 30, 2025: her broker (one of the major three) issued a YTD 1099-B preview. Box 1d (proceeds): $8,000. Box 1e (cost basis): $0.
File with that $0 and her tax software taxes the whole $8,000 as gain — even though she already paid tax on $5,000 of it at vest. That's the double-tax.
The $3,844 breakdown, if she did nothing
If Maya filed her 2025 return using the broker's $0 cost basis as-is, her tax software would compute a long-term capital gain (held >1 year) of $8,000. 3%) = $1,944.
Plus the $1,900 she already paid at vest on the $5,000 of W-2 ordinary income that funded her acquisition. Total tax outlay on these shares: $3,844.
Why brokers report $0 — and why the IRS lets them
The full why, with the IRC citations
Under IRC §6045, brokers are required to report cost basis on covered securities. The basis they report is the amount the holder actually paid for the security at acquisition.
For granted shares (RSUs, ESPP, stock options, gift), the holder paid $0 — so the broker reports $0. This is correct from the broker's perspective and consistent with the §6045 reporting rule.
But the holder's real cost basis is different.
Under IRC §83(a), when property is transferred to a service provider in exchange for services, the property's fair market value at vesting is included in ordinary income — meaning the holder has effectively "paid" that FMV via their wages.
The basis in the property steps up to that FMV per Treas. Reg. 83-4(b). So for Maya, the basis is $5,000 (FMV at vest), not $0 (cash paid at vest).
The broker does not know this. The broker sees only the share transfer event, not Maya's W-2.
So the 1099-B is technically correct per §6045 — but Maya is responsible for adjusting it on Form 8949 when she files her 1040.
The Form 8949 fix — what goes in each box
Maya's exact entries. Copy this row pattern for any RSU sale:
| Box | She enters | Why |
|---|---|---|
| (a) Description | 100 sh ACMECO | identify the lot |
| (b) Acquired | 04/15/2024 | the vest date |
| (c) Sold | 09/01/2025 | the sale date |
| (d) Proceeds | $8,000 | matches 1099-B box 1d |
| (e) Reported basis | $0 | must match the wrong 1099-B |
| (f) Code | B | “basis is incorrect” |
| (g) Adjustment | −$5,000 | this cuts the gain |
| (h) Real gain | $3,000 | auto-computed |
The savings, lined up
Three scenarios — unfixed wrong, fixed right, and "is it really long-term?"
| Left $0 basis (worst case) | Left $0 basis (LTCG) | Fixed on Form 8949 | |
|---|---|---|---|
| Cost basis claimed | $0 | $0 | $5,000 |
| Taxable gain | $8,000 | $8,000 | $3,000 |
| Tax on the sale | $3,304 | $1,944 | $729 |
| Already paid at vest | $1,900 | $1,900 | $1,900 |
| Total tax outlay | $5,204 | $3,844 | $2,629 |
Scenario 1: Unfixed (wrong)
- Cost basis claimed: $0
- Capital gain: $8,000
- Federal LTCG tax: $8,000 × 15% = $1,200
- California tax: $8,000 × 9.3% = $744
- Total tax on the sale alone: $1,944
- Plus already paid at vest: $1,900
- Total tax outlay: $3,844
Scenario 2: Fixed via Form 8949 column (g)
- Cost basis claimed (after adjustment): $5,000
- Capital gain: $3,000
- Federal LTCG tax: $3,000 × 15% = $450
- California tax: $3,000 × 9.3% = $279
- Total tax on the sale alone: $729
- Plus already paid at vest: $1,900
- Total tax outlay: $2,629
Savings from the fix: $3,844 − $2,629 = $1,215 on this single sale.
And it can get worse.
If the sale got taxed at her full 32% rate instead of the 15% long-term rate, the gap balloons — that's where the headline $2,574 worst-case number comes from.
The worst-case math, step by step
Maya's federal marginal rate is 32%. 3% (CA) = $3,304. Plus the $1,900 already paid at vest. Total wrong-case outlay: $5,204. Compare to the correct $2,629.
Worst-case savings from the fix: $2,574 (vs. the realistic $1,215 when the rate is correct).
Run your own number
Maya's shares were a $1,215 save (up to $2,574 worst-case). Yours could be more or less — it scales with how many shares you sold and your tax rate. Plug in your own sale below and see your number before you file:
Doing it in your tax software
The exact clicks, if you use TurboTax or TaxAct — open whichever you need:
Step-by-step in TurboTax
- Go to Income → Investments → Stocks, Mutual Funds, Bonds. Import the 1099-B from your broker if you have not already.
- Find the RSU sale row (100 sh ACMECO). Click Edit or the pencil icon.
- Scroll to the "I'll enter additional info on my own" option → "This is a less common situation".
- Check "The cost basis on my 1099-B is incorrect or missing".
- Enter the corrected basis in the "Corrected cost basis" field: $5,000 (FMV at vest × shares). Pull this from your final paystub the year of vest, your W-2 box 14 RSU code, or your Mathstub Equity Comp Decision Tracker §3 Vest log row.
- TurboTax automatically generates the Form 8949 row with code "B" in column (f) and the −$5,000 adjustment in column (g). You do not enter column (g) directly.
Step-by-step in TaxAct
- In the Federal Q&A flow, navigate to Investment Income → Stocks, Mutual Funds, Bonds (1099-B).
- Add or edit the lot for the RSU sale.
- On the lot detail page, check "Reported cost basis is incorrect".
- Enter the corrected basis (same as TurboTax: FMV at vest × shares).
- TaxAct writes the proper adjustment to your generated Form 8949 column (g) and code (f).
Old returns count too — the 3-year rule
Maya found the same mistake on her 2023 return (50 shares, $0 basis, $1,500 overpaid). You can fix old returns for a refund — up to 3 years back.
The rule + the deadline (IRC §6511)
IRC §6511 gives a 3-year statute of limitations to amend a return for refund. Maya filed Form 1040-X for tax year 2023 within the 3-year window (deadline: 4/15/2027).
The amendment generated a $1,500 refund + 6% IRS interest (~$135). Total recovered from the 2023 amendment: ~$1,635.
Combined with the 2025 save: $1,215 + $1,635 = $2,850 across two tax years from a single afternoon's work.
This isn’t just an RSU thing
The same $0-basis trap hits every kind of employer stock that ran through your W-2. Your real basis is whatever value was already taxed — here’s the cheat sheet:
| Stock type | Your real basis is… |
|---|---|
| RSUs | Share value on the vest day |
| ESPP (qualifying) | Value on the purchase day |
| ESPP (disqualifying) | Value on the purchase day |
| ISO (disqualifying) | Value on the exercise day |
| NSO exercise | Value on the exercise day |
The full taxonomy + when to get a CPA
The same cost-basis fix mechanic applies to ALL employer stock that flows through W-2 income: RSUs (real basis = FMV at vest); ESPP qualifying dispositions (real basis = FMV at purchase, even though only the discount portion was taxed); ESPP disqualifying dispositions (real basis = FMV at purchase, full spread taxed as W-2); ISO disqualifying dispositions (real basis = FMV at exercise, bargain element taxed as W-2); NSO exercises (real basis = FMV at exercise).
The full taxonomy with citations is in our companion post: /blog/rsu-cost-basis-fix-form-8949.
For high-stakes situations ($10,000+ of basis adjustment across multiple lots, multi-year amendments, or ISO disqualifying dispositions with AMT credit interactions), engage a CPA.
The Mathstub /toolkit/equity-comp-decision-tracker template includes a full RSU cost-basis fix kit that catches this exact error pattern before you file.
Sources & citations
IRC §83(a) (FMV at vest taxed as ordinary income); IRC §1012 (cost basis of property generally); IRC §6045 (broker reporting requirements); IRC §6045B (transfer statements); IRC §6511 (statute of limitations on refunds); Treas. Reg. §1.83-4(b) (basis equals FMV included in income); IRS Form 8949 instructions (column (g) adjustment codes); IRS Publication 525 (Taxable and Nontaxable Income); IRS Publication 550 (Investment Income and Expenses); IRC §422 (ISO qualifying disposition rules); IRC §423 (ESPP qualifying disposition rules); Form 3922 (ESPP information return); Form 3921 (ISO information return); Form 1040-X (amended return).
Run your own numbers
- RSU Cost Basis Fix
Brokers report $0 cost basis on RSU sales, which double-taxes income already on your W-2. See your correct basis (the share price on your vest day), what you’d overpay, and the exact one-line Form 8949 fix.
- RSU Tax Shortfall
See the gap between the 22% (or 37%) your employer holds back when RSUs vest and what you’ll actually owe at your real tax rate.
- ESPP Qualifying Disposition
See how much of your ESPP sale is taxed as regular income vs. the lower long-term gains rate, with federal, state, and the 3.8% investment surtax — and whether holding long enough to “qualify” actually saves you money.
By Mathstub Editorial · Reviewed by Reviewed against IRS primary sources
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