Step-by-step · 3 min read
Fixing cost basis on your 1099-B
Brokers often report the cost basis of shares from equity compensation as zero, or leave it blank. If you file using those numbers, income already taxed on your W-2 is taxed again as a capital gain.
This is the single most common and expensive mistake we see on returns tech professionals prepare themselves. The fix is routine once you have the right statements.
- Who it fits
- Anyone who sold RSU, ESPP or option shares during the year.
- Figures
- 2026 tax year
The key rule
Your correct basis is what you paid plus any amount already taxed as wages. For RSUs, that is the full market value at vest. For ESPP and NSOs, it is what you paid plus the ordinary income reported.
How it works
Broker rules require them to report only what you actually paid for the shares. For RSUs, you paid nothing, so the 1099-B may show $0. The income you were taxed on at vest is on your W-2, not on the 1099-B. Your broker's supplemental statement usually shows the adjusted basis that includes it.
5 steps
Download both documents
Get the 1099-B and the supplemental statement (sometimes called a "supplemental information" or "stock plan transactions" report) from your broker.
Match each sale to its lot
Every sale should tie to a vest, a purchase or an exercise. Sales to cover taxes happen on the vest date at almost the same price.
Compare the reported and adjusted basis
Where the supplemental statement shows a higher basis, the difference is income already on your W-2.
Report the adjustment
Each sale goes on Form 8949 with the reported basis, an adjustment code "B" and the corrected gain. We handle this when we prepare your return.
Fix past years if needed
If you filed earlier returns with $0 basis, you may be able to amend for a refund within three years of filing.
Example
RSU shares
100 RSU shares vested at $200 and were sold at $205. Your W-2 already includes $20,000. The 1099-B shows $0 basis, suggesting a $20,500 gain. The real gain is $500.
Common mistakes
- Tax software that imports your 1099-B automatically usually uses the wrong basis.
- Shares moved between brokers can lose their basis records. Keep your vest confirmations.
Key dates
- Mid-February
- Brokers publish 1099-B and supplemental statements.
Questions we hear
Do I need to fix sell-to-cover sales too?
Yes. They are usually tiny gains or losses once the basis is corrected, but they need to be reported correctly.
What to send us
- 1099-B
- Supplemental statement
- Vest and purchase confirmations
Upload them to your client portal.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.