You are granted RSUs that vest at a later date. When they vest they show up on the W2 in box 14 with a code RSU or on box 12 with a code V. Part of the RSUs are sold by the company to offset the federal and sometimes state withholdings.
Now the RSUs can be sold. When you sell them they show up on the 1099 from the broker, but sometimes the cost basis of the shares do not show up on the 1099., but you can use the cost basis the amount you have on the W2. The reason the cost basis on the 1099 is sometimes zero is that the broker might not know the Fair Value of the shares at the time they were granted.
If you believe in the company, it may make sense to hold on to the shares for a year so that you take advantage of the lower long term capital gain rates.
Sometimes after the shares are granted, the price of the shares go down. If you sell them for less than the fair value when they were granted you have a capital loss.
If the 1099 is not reported on the tax return, the IRS will send the taxpayer a CP2000 letter which is a letter of adjustment that the IRS sends taxpayers when items are missing from their returns. The solution is to amend the return and writing a letter of explanation on behalf of the taxpayer and showing documents to explain the basis. If the amount calculated by the IRS is not accurate it is important to submit all the documents that show the correct basis.
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