If you have RSUs vesting or sold stocks, you’ll want to make sure you don’t forget this important step when filing your taxes. This might be obvious to most, but when I first started doing my taxes for my big girl job, I had no clue what the elusive supplemental information sheet was and how not knowing about it could have cost me thousands of dollars. I went to a CPA for help and they didn’t know what a supplemental sheet was either. They shrugged off the $20,000 I owed according to their tax software stating I simply “made a lot of money.” As easy as it is to outsource financial responsibility, knowledge is power. This was one of my first lessons in the importance of taking full responsibility for understanding personal finances. In my research I discovered I would get taxed on my RSUs twice had I not used the supplemental sheet!
not knowing about it could have cost me thousands of dollars. I went to a CPA for help and they didn’t know what a supplemental sheet was either. They shrugged off the $20,000 I owed according to their tax software
So let’s talk about doing taxes when you’ve got RSUs or been making some capital gains moves throughout the year. Ideally the tax software you choose will allow you to import your 1099. I’ve used TaxAct and TurboTax to import my 1099 in the past. I’ve not used FreeTaxUSA this year, but it appears FreeTaxUSA also handles stocks as well.
The initial import of your 1099 might have you shook to the core. Download your consolidated 1099 and scroll all the way down to view your Supplemental Information Sheet.
If your brokerage account is with Fidelity, you can find your supplemental sheet under
Documents tab -> Tax form -> click the PDF called Consolidated Form 1099
Some tax software will alert you which entries “Needs Review,” but I try to double check all of the entries even if the tax software deemed an entry good to go.
Have your supplemental sheet and your tax software side by side.
The columns you will want to update for each entry with the data in your supplemental sheet will be
- Term and type
- Date acquired
- Cost basis
Fidelity Investments. (n.d.). Stock Plan Services: Tax Guide for Restricted Stock & Performance Awards. Retrieved from https://workplaceservices.fidelity.com
1) Term and type
Your 1099-B form will categorize each sale or vest into 4 different categories
- Short-term transactions for which basis is reported to the IRS
- Short-term transactions for which basis is not reported to the IRS
- Long-term transactions for which basis is reported to the IRS
- Long-term transactions for which basis is not reported to the IRS
Match the transactions in the tax software to where it has been categorized in the 1099-B form.
It’s important to understand long-term capital gains taxes and short-term capital gains taxes as they get taxed at different rates. Long-term capital gains get taxed at 15% while your short-term capital gains get taxed at your income tax rate.
2) Date acquired
This will verify you held your stock for over a year or not. If you held it over a year, this will qualify your gains to be taxed the long term capital gains tax rate.
3) Cost basis
The column in the supplemental sheet is specifically “Adjusted Cost or Other Basis (z)”
Put this number for that sale/vest under 1e cost or other basis and watch that “Federal Owed” and “State Owed” turn into “Federal Return” and “State Return.” Hopefully you’re back in the green! If not, oh gurl you did make a lot of dough last year and might need to revisit your withholding rate.
Example of an RSU Sale & Tax Treatment
Scenario:
- 1,000 RSUs vested on January 1, 2024.
- The stock price at vesting = $50/share.
- You immediately sell all shares for $51/share.
- Your 1099-B might only report proceeds of $51,000 (1,000 × $51).
But your cost basis was $50,000 (1,000 × $50).
Reporting Taxes with the above scenario:
- Ordinary Income (W-2): You already reported $50,000 as ordinary income.
- Capital Gain (1099-B): Only the $1/share gain ($1,000 total) is a short-term capital gain. (Short-term since in this scenario shares were sold right away)
- Adjust the cost basis, or it might look like you made $51,000 in capital gains, which is incorrect.
Tax season can be stressful and hectic, but being conscious of taxes is not just a once a year thing. It’s something to consider throughout the year to keep your taxes low and protect your personal finances. We’ll have another Working Girls Guide discussing tax tips coming soon. You got this girl!
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