You Probably Overpaid on RSUs You Already Sold. You Have Three Years to Take It Back.

Most tax writing about RSU cost basis is written for the return you have not filed yet. Which is useful, in the way a seatbelt lecture is useful after the drive. The more interesting question, and the one nobody seems to want to answer, is what happens if it already went wrong two Aprils ago and you have been getting on with your life ever since.

It is usually fixable. The money is usually real.

Did I overpay tax on RSUs I sold?

If you sold vested RSUs in a year you have already filed, and the sale went onto the return straight off the Form 1099-B with no basis correction, then yes, you overpaid. The amount is usually much larger than people guess.

Start with why your broker did that, because it is not a mistake and it will keep happening. Brokers are only permitted to report what you paid out of pocket for the shares. For RSUs, you paid nothing. So the correct entry, from their side, is a cost basis of $0. They are following the rule.

The problem is what the rule produces. When your RSUs vested, the full value went onto your W-2 as ordinary income and you paid tax on it. Then the 1099-B says those same shares cost you nothing. If nobody corrected that on Form 8949, your return reported the entire sale as gain, including the part already taxed as wages. Same dollars, taxed twice, and the IRS none the wiser because the paperwork agreed with itself. The longer version of why this happens is its own article.

How much money is actually at stake?

A worked example. Hypothetical figures, entirely ordinary fact pattern:

That is $3,500 of tax on a sale that made no profit at all. The shares were sold the day they vested, at the price they vested at. There was no gain to tax. And that was a single vest. Most people receiving RSUs receive them quarterly.

Now skip the table. For a same-day sale you can estimate your own number in one step, because the phantom gain is simply the whole sale price. Multiply the proceeds by your marginal rate. Sold $40,000 of vested stock the day it vested, in the 35% bracket? The overpayment is roughly $14,000. Run that against every same-day sale in the year and you have the size of the problem before you open a single form. Use this every time. It will not let you down.

How do I check my own return for this?

You do not need us for this part, and you should not pay anyone to tell you the answer. Pull the PDF of the return and find Form 8949. On the RSU sale rows, check two columns:

• Find the right section first. RSU sales almost always land in the group headed basis not reported to the IRS, box B for short-term or box E for long-term. That heading is doing you a favour. It is the form telling you the number below has not been checked by anyone.
• Column (e), cost or other basis. If it reads $0 or is blank on a sale of vested RSUs, that is the flag. An incorrect cost basis here is the whole problem.
• Columns (f) and (g), the adjustment. A return that handled this correctly shows code B in column (f) and a negative adjustment in column (g). If those are empty, nobody corrected anything.

There is a faster tell. If your Schedule D shows a large capital gain in a year you do not remember making money in the market, this is usually why.

How long do I have to amend?

This is the part with an expiry date on it.

Under IRC §6511, a refund claim has to be filed within three years of when you filed the return, or two years from when you paid the tax, whichever is later. Miss it and the money stops being yours. Not as a penalty. Just as a matter of the statute closing.

Here is the wrinkle nearly every article on this skips, and it is the one that decides whether some people still have a window at all. A return filed early is treated as filed on the due date. A return filed on extension is treated as filed when you actually filed it. So two people amending the same tax year can have deadlines six months apart. If you extended and filed in October, your window runs to October, not April. Check which one you are before you write a year off.

What does amending actually involve?

Less than people fear. You file Form 1040-X for the year in question with a corrected Form 8949 attached, showing the real basis and the code B adjustment. The 1040-X is three columns: what you originally reported, the change, and the corrected figure. Then a plain-language explanation of why. It genuinely can be plain language. This is a common, well-understood correction, not an argument you have to win.

What to gather:

• The supplemental statement from your broker for that year. This is the document that matters and most people have never opened it. It sits beside the 1099-B in your account's tax documents and lists the actual adjusted cost basis per lot. E*TRADE, Fidelity, Schwab and Morgan Stanley all produce one.
• Your W-2 for the vest year, to corroborate the income that created the basis.
• The filed return for the year you are amending.

Then eight to twelve weeks for the IRS to process it, sometimes sixteen. Slow, but it is a refund, not a deadline. The money arrives when it arrives.

Why did nobody catch this already?

Because nothing looked wrong. Tax software does what it is told. If the 1099-B import populated a $0 basis and nobody overrode it, the software produced an internally consistent return with a large capital gain on it, and nothing anywhere flagged that the gain was fictional. It is not a software failure so much as a category of error software cannot see.

There is good writing on this trap from wealth-management firms, and their clients are exactly the people it happens to. So it is possible you were told. We have written about it ourselves: how RSUs are taxed catches the same error in the year it happens, three years before an article like this one becomes necessary. But a wealth manager can find this and still not be able to fix it. Recovering the money means filing an amended return, and that takes a credential the SEC does not issue. An Enrolled Agent is licensed by the Treasury to do exactly that in any state, and to represent you if the amended year draws a question.

When is it not worth doing?

Three cases, and the first one ends the conversation. We would rather say them out loud than have you find out after paying someone.

• The year is closed. Past the §6511 window the answer is no, and no amount of paperwork changes it. Check your dates before anything else.
• Your basis was already corrected. If code B is there, this article is not about you. Nothing to recover.
• The shares appreciated a lot before you sold. Then a chunk of that gain is real gain and genuinely taxable. The correction shrinks it. It does not erase it.

The case where it is clearly worth doing is the common one: same-day or near-same-day sales, where the reported gain is almost entirely phantom, across more than one year.

What to do now

Pull the last three years of filed returns and look at Form 8949 for the code B adjustment. That is the whole diagnostic. If it is missing on RSU sales, there is money sitting in a year that has not expired yet, and the oldest year is the one to check first.

Most tax writing is a seatbelt lecture delivered after the drive. This one is not. Pull the return. Find column (f). See whether anyone corrected it.

Three years is the whole window. The oldest one closes first.