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LearnFAQTax Optimization

Why is my broker's cost basis wrong on RSU and ESPP sales, and how do I fix it?

Answer

Brokers frequently report a cost basis that's too low on equity-comp sales, which makes you overpay tax if you don't catch it. For RSUs, the basis should equal the share value at vesting that was already taxed as wages, but the 1099-B often shows zero or only what you paid (nothing). For ESPP shares, the basis often omits the discount that was already taxed as ordinary income. If you accept the reported number, you pay tax twice on the same dollars. The fix: on Form 8949, adjust the basis up to the amount already included in your W-2 income, using your broker's supplemental statement and any 3922 or 3921 forms. This single correction can save thousands. Keep your vesting and purchase confirmations so you can prove the true basis.

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