How to catch missing cost basis and tax withholding before you overpay
If you’ve ever looked at your RSU reporting during tax season and thought, “This doesn’t look right…” — you’re probably onto something.
Every year, I see the same issue:
Your RSUs are taxed through payroll at vesting
But the brokerage 1099 shows:
$0 cost basis, as if no tax has been withheld on the shares.
And because tax prep today is largely automated, that incorrect data often just erroneously flows through.
No flag. No warning. Just a higher tax bill than necessary.
This isn’t a rare case. It’s a recurring disconnect between payroll and brokerage systems. And if you don’t catch it, you can end up paying taxes twice on the same income because your RSU cost basis is wrong on your 1099.
Handfuls of times I’ve had new clients tell me how they paid thousands (even tens of thousands) of dollars at tax filing due to their RSUs. And that’s where my eyebrow goes straight up! Sometimes these clients do have a ton of shares and a spectacular year that makes capital gains tax on gains quite high. Especially if they sell within 1 year, making them short-term gains taxed at ordinary rates. But more likely, they’re paying tax on their shares a second time around. And that’s when we need to do some forensic accounting for an amendment.
Why This Happens… Over and Over
RSUs live in two completely separate worlds:
Payroll system, which reports income, withholds taxes, feeds into your W-2
Brokerage / equity platform, which holds the shares, reports sales activity (1099-B)
The problem?
These systems don’t have the same ultimate reporting goals. One is focused on income/taxes. The other focused on share quantity. So the data you need for tax filing is disjointed in it’s delivery.
Platforms like Computershare (and others) typically have all the correct information, but it’s stored in different places and not always fully shared with the custodian in charge of creating the 1099.
How This Should Work, with Examples
At vesting:
RSUs are taxed as ordinary income, with taxes withheld in the year of vesting.
That taxed value becomes your cost basis.
Example: 500 shares vest at $100/shares = $50,000 income taxed through payroll. $50,000 is your basis on these 500 shares.
So when you eventually sell:
You should only pay tax on the gain above that value.
Example: You go to sell all 500 shares 2 years later, the share price is now $120, making the value $60,000. You should only pay long-term capital gains tax on the $10,000 increase.
But when the 1099 shows $0 basis:
The IRS sees the full sale proceeds as taxable.
Example: With incorrectly reported basis, the tax filer will assume the full $60,000 is a long-term capital gain. If you’re in the 15% bracket, that’s $9,000 in gains tax vs $1,500 if basis was correctly reported. A HUGE DIFFERENCE!
That’s how double taxation happens!!!
What to Check Every Year (Yes, This Is On You)
Like it or not, this is something employees (or advisors like me) need to monitor.
Each year, check your 1099-B before providing it to your CPA or uploading it to a virtual service.
- Does it show $0 or missing cost basis?
- Do the reported gains look suspiciously big?
If your 1099 shows zero basis, that does not mean your basis is zero. You need to fill in the blank.
Where to ACTUALLY Find the Right Numbers 
This is where most people get stuck. The key information may not be in one place.
1. Paystub at Vesting (Your Anchor)
This is the easiest/most accessible place to confirm taxes have been paid already on the RSU. Although there isn’t much doubt on that fact, the question is more… how much tax has been paid.
Look for “RSU Income” or “RSU Offset.” For a paystub reporting RSU vests, you’ll see your withholdings are abnormally high or report an RSU offset which represent the value of sold shares to cover the taxes. RSUs pay federal, state and FICA taxes. The federal tax assumption is often, but not always, 22%, even if your normal paystub may typically be taxed at a different rate.
2. Equity Platform / Custodian Documents (Where the Detail Lives)
If you’re using Computershare, focus on:
Year-End Statements
Confirmations to Sell / Sell-to-Cover
Transaction Statements, particularly helpful to capture dividend reinvestment plan (DRIP) shares which can be why sometimes you feel like you have more shares than you remember.
Equity Award Release Confirmations
These documents typically show the most complete records of what actually happened:
- Shares vested
- Shares sold for taxes
- Any fees paid which impact basis
- Price at vest (your true cost basis per share)
Taxes handled through share withholding or sale
3. Other Common Platforms (Same Info, Different Names)
If you’re not on Computershare, you’ll find similar documents at Fidelity (Stock Plan Services / NetBenefits), Morgan Stanley (Shareworks / StockPlan Connect), E*TRADE (Stock Plan Accounts).
Look for documents or downloadable spreadsheets labeled:
- Release Confirmation
- Vesting Detail
- Supplemental Tax Information
Gains & Losses Supplement
The names vary, but the goal is the same.
4. Don’t just rely on your vesting schedules.
It shows what was expected to vest, not the actual stock price at the time of vesting, taxes withheld, fees paid, DRIP shares, or forfeited shares. It can give you some direction, but that’s about it.
If the Horse Is Already Out of the Barn
If your attempting to sell shares years down the road vs just reporting immediately sold shares in the year of vesting, finding the details can be messy due to separating from employment, account rollovers, stock splits, mergers, etc. Here’s how to fix it:
Rebuild the cost basis using any available Transaction Statements/Year-end Summaries
Shares vested × price at vest = basis
Dividends received x price at reinvestment = basis
- Historical prices or provided agreements at the time of mergers, acquisitions, stock splits or repurchases. Stock prices change minute to minute, so sometimes it’s hard to know your exact share price at sale, but for IRS purposes, so long as you can provide something reasonable and defendable to justify missing basis you should be ok. For instance, using a published stated merger price or consistently using close-of-day prices when reconstructing basis. This is where your CPA can provide advise on what makes the most sense, as some circumstances are more complicated than others.
Compare and Correct your 1099-B
- Compare shares sold vs what you’ve reconstructed. Did you sell all 500 shares but only backed into 400 shares? Keep digging! You may be missing DRIP shares or a one-off equity award unrelated to an RSU vesting schedule.
Adjust basis as needed (Form 8949)
The Bottom Line
There is no single document that tells the full story:
- Payroll shows the taxes
- Equity platforms show the vesting details
- 1099s show the sale
And someone has to connect the dots. This is one of those areas where the system looks automated, but still depends heavily on someone paying attention.
Need Help Untangling It?
If you’ve had multiple vesting years, transfers out of platforms like Computershare, stock events (splits, mergers, acquisitions)
…it may be worth getting a second set of eyes on it.
Because once this gets messy, it doesn’t fix itself. And you only have so long to amend incorrectly filed returns.
