The Persona (The "Hero")
Elena, a Senior Director of Product at Salesforce. Over five years of high performance, Elena had accumulated a significant RSU (Restricted Stock Unit) portfolio. Like most tech leaders, she was "auto-selling" a portion of her vests to cover taxes, assuming the brokerage and the IRS were perfectly in sync. When she finally sold a large block of 2,000 shares to fund an investment property, she expected a standard capital gains bill.
The Challenge (The "Villain")
The $0 Cost Basis Error. When Elena received her 1099-B from her brokerage, she was horrified. The "Cost Basis" column for her 2,000 shares showed $0.00.
Because of a 2014 IRS reporting change, brokerages are often prohibited from reporting the "adjusted" basis of RSUs. They report the "purchase price" (which for RSUs is $0) instead of the "taxable value at vest."
The Stakes: If Elena filed using this $0 basis, she would be taxed on the full sale price as if it were pure profit—even though she had already paid ~37% income tax on that value the day they vested. She was staring at a $27,000 phantom tax bill.
The Analysis (The "Insight")
The Basis Recovery Audit. Elena uploaded her 1099-B and her W-2s to Rally. Our engine performed a forensic cross-reference between her brokerage's "Form 1099-B" and her employer's "Supplemental Tax Documents."
Rally’s analysis revealed that while the broker reported $0, Elena had actually "paid" $135,000 for those shares through her labor (income already reported and taxed on her W-2). Rally identified exactly which 12 vesting events across 3 years were missing their "tax-paid" data.
The Solution (The "Action")
The "Code B" Adjustment. Instead of spending $500/hour for an accountant to manually reconstruct years of vest dates and FMVs, Elena used Rally’s automated Basis Adjustment Worksheet.
Rally generated a pre-filled Form 8949 with the correct "Code B" adjustments. This told the IRS: "The broker reported $0, but here is the verified, tax-paid basis from the W-2 income." Elena simply handed this document to her CPA, who imported it directly.
The Result (The "Win")
Tax Bill Evaporated. * Immediate Savings: Elena’s taxable gain dropped from $150,000 to $15,000.
The Cash Win: She saved $27,000 in "ghost" taxes—money that went toward her investment property.
The Time Win: A process that would have taken a human accountant a full weekend was solved by Rally in less than 10 minutes.
Detailed Breakdown: The Mechanics of the "Double Tax"
To truly understand how Rally protected Elena, we have to look at the three-stage lifecycle of an RSU and where the reporting breaks down for the average tech employee.
Stage 1: The Vesting (The Income Event)
When Elena’s 2,000 shares vested, they had a Fair Market Value (FMV) of $67.50 per share.
Total Value: $135,000.
The Tax: This $135,000 was added to her W-2 as "Ordinary Income." Salesforce automatically "Sold to Cover," withholding roughly 37% of the shares to pay her federal and state taxes.
The Result: Elena now owned the remaining shares with a "tax-paid" cost basis of $67.50.
Stage 2: The Sale (The Capital Gains Event)
Two years later, Elena sold those shares at $75.00 per share.
Sale Proceeds: $150,000.
Actual Profit: $7.50 per share ($150k - $135k = $15,000 total gain).
Tax Owed: At a 20% Long-Term Capital Gains rate, she should owe $3,000.
Stage 3: The Reporting Failure (The Villain's Entry)
This is where the "Double Tax" happens. Under IRS regulations (Section 6045), brokerages like Schwab, E*Trade, or Fidelity are required to report "Gross Proceeds" on Form 1099-B. However, for "non-covered" securities—which include many RSU grants—they often report a Cost Basis of $0.
When Elena’s tax software (or an uninformed CPA) looks at the 1099-B, it sees:
Proceeds: $150,000
Basis: $0
Taxable Gain: $150,000
Tax Owed: $30,000
The Gap: The difference between the $3,000 she actually owed and the $30,000 the brokerage reported is the $27,000 Double Tax.
How Rally’s "Proof Engine" Solves This at Scale
Elena’s case isn't unique; it's the standard experience for employees at Meta, Google, Amazon, and Salesforce. Rally was built to automate the "Forensic Reconstruction" of these events.
1. Automated FMV Reconstruction
Most employees don't keep track of the stock price on the exact minute their shares vested three years ago. Rally’s database contains historical Fair Market Values for every major public tech company. By matching your vest dates to our price database, we recreate your "Real Basis" instantly.
2. Supplemental Document Scraping
Brokers actually do know your basis—they just don't put it on the 1099-B sent to the IRS. They hide it in a separate "Supplemental Tax Report" that is often 40+ pages of dense tables. Rally’s AI "reads" these PDFs, extracts the adjusted basis, and maps it to your sales.
3. Error-Proof Form 8949 Generation
The IRS provides a specific mechanism to fix this: Form 8949, Column (g). By entering the difference between the $0 basis and the Real Basis in Column (g) and using Adjustment Code "B," you legally notify the IRS of the broker's error. Rally generates this form automatically, ensuring you use the correct codes to avoid an audit.
The "Rally Effect" vs. The Traditional Way
Feature | The Traditional Way (CPA/Manual) | The Rally Way |
Data Collection | Hours spent digging through old paystubs and PDFs | One-click brokerage sync or PDF upload |
Accuracy | Prone to human math errors across dozens of vest dates | Algorithmic matching with 100% precision |
Cost | $500–$2,000 in additional "specialist" accounting fees | A fraction of the cost, built into the platform |
Audit Risk | High, if adjustments aren't documented correctly | Low, with a full "Basis Audit Trail" provided |
Conclusion: Don't Let Your Equity Be Erased by Paperwork
For Elena, the $27,000 saved was more than just a number—it was the difference between closing on her investment property or being forced to pass on the deal.
The IRS receives billions of dollars in "overpaid" taxes every year simply because taxpayers don't have the tools to correct their brokerage's reporting. Rally is that tool. We don't just "do your taxes"—we audit your equity to ensure you keep every dollar you’ve earned.
CTA:
"Don't pay the IRS twice. Run your 1099-B through Rally and see if you have a hidden 'Double Tax' waiting to be fixed."
