Case study: the $14,000 double-tax RSU mistake

How much can one wrong number on a tax form cost you? Enough to notice. Here is a composite of a situation I see every filing season: a filer who paid thousands in tax he did not owe, because his broker reported the wrong cost basis and he trusted the form. The numbers below are illustrative, the mistake is real and common.

The setup

Call him David. A few years of RSUs at a public company, all vested, all reported as income on his W-2 along the way. He sold a batch of shares to buy a house, got his 1099-B from the broker, handed everything to his tax software, and filed. Clean, fast, done.

Except the refund was smaller than he expected, and the tax on the stock sale looked enormous for shares he had barely held.

What went wrong

His 1099-B reported the cost basis on those shares as zero.

That is the classic RSU reporting trap. Brokers generally cannot include the vesting value, the compensation income, in the basis they report. So the form showed zero basis, which told the software that the entire sale price was a capital gain. David got taxed on the full proceeds, on top of the ordinary income tax he had already paid at vesting. The same dollars, taxed twice.

The mechanics of why this happens, and the fix, are in the RSU tax traps that hit in April. David did nothing reckless. He trusted a form that was incomplete by design.

Sizing the damage

Say David sold shares for $40,000 that had vested at a value of $40,000. His real gain was close to nothing, because he sold near the vesting price. But the zero-basis 1099-B reported a $40,000 gain.

The tax on a wrongly reported gain depends on the applicable capital gains rate and the filer’s bracket. For 2026 the long-term breakpoints are, for married filing jointly, 0% up to $98,900, 15% up to $613,700, and 20% above; for single filers, 0% up to $49,450, 15% up to $545,500, and 20% above 2026. A short-term gain, on shares held a year or less, is taxed at your ordinary rate instead.

Apply a plausible rate to a phantom $40,000 gain and the overpayment lands in the thousands. In David’s composite, call it $14,000 of tax he never owed, sitting on the return as if it were real.

The fix

The good news: this is correctable, and you do not need the broker to reissue anything.

The lesson

The hidden price here was not just the tax, it was that David almost never caught it. A smaller refund is easy to shrug off. Thousands of dollars walked out the door over a single column on a form most people never question.

Check the basis on every RSU sale, every year. The shares were taxed once at vesting. Do not let a zero on a 1099-B tax them again. If you think a past return had this mistake, it is worth a look, and a short fit check can tell you whether an amended return is worth filing.