1099-NEC for NQ share repurchase proceeds

Forum|Forum|3 years ago
February 20, 2023
4 replies
87 views

Situation: I received a 1099-NEC but I'm not self-employed. I received this form because my previous employer decided to repurchase my shares (which I had purchased with after-tax dollars after exercising NQ options). The amount listed on box #1 /Nonemployee compensation/ is the TOTAL proceeds from the repurchase (not just the gains on top of my tax basis).

Questions:
1. How should I enter the form into TurboTax as most options lead me to create Schedule C, which does not seem suitable for me as this isn't business income.

2. Is the amount on box 1 on the form correct? Shouldn't it only reflect the gain (proceeds less basis)?

TIA for your help!

Best answer by DaveF1006

Yes, this type of reporting is confusing but since this is a stock repurchase by a former employer, I have outlined the best method to report this. Before you begin however, make sure you delete all of your previous entries. You will need to start fresh when you begin entering information as described below.

Go to federal>wages and income>investment income>stocks, bonds, other
Now you will answer some preliminary questions. Say no if you did not receive a 1099B.
Next screen is critical because it asks you for the sale price, description, what you originally paid for it, date sold, date acquired etc.
In the description section, be sure to mention this is an employee stock redemption reported on a 1099 NEC.
Now you will be asked a question if this was a sale of employee stock, here you will say yes.
The next screen will ask what type of employee stock is it. Non-qualified stock option plan would be the most appropriate choice for this selection.
Finish out the section reporting this income.

I think the answer to your first question is satisfied by recording your 1099 NEC as an investment sale of employee stock that will not appear on a schedule C.

Your second question is also satisfied by the third point when you enter sale price, description, what you originally paid for it, date sold, date acquired etc.

Let us know if this helps !!

DaveF1006Answer

Level 15

Go to federal>wages and income>investment income>stocks, bonds, other
Now you will answer some preliminary questions. Say no if you did not receive a 1099B.
Next screen is critical because it asks you for the sale price, description, what you originally paid for it, date sold, date acquired etc.
In the description section, be sure to mention this is an employee stock redemption reported on a 1099 NEC.
Now you will be asked a question if this was a sale of employee stock, here you will say yes.
The next screen will ask what type of employee stock is it. Non-qualified stock option plan would be the most appropriate choice for this selection.
Finish out the section reporting this income.

I think the answer to your first question is satisfied by recording your 1099 NEC as an investment sale of employee stock that will not appear on a schedule C.

Your second question is also satisfied by the third point when you enter sale price, description, what you originally paid for it, date sold, date acquired etc.

Let us know if this helps !!

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NQDC incomeAuthor

Level 2

Dave,

This was incredibly helpful. Thanks for holding my hands through this one!

Much appreciated!

TomSlott

Level 2

One point of clarification. I did not purchase the stock originally. It was a Restricted Stock Award granted to me by the parent company of the company for which I am employed. I have never gotten a w-2 from the parent company, only from one of the companies under it's umbrella.

Does this make a difference in how it should be reported?

Thanks

ThomasM125

Level 15

It might only make a difference in the calculation of the cost basis of the shares sold. In the year that the stock vested, you would have paid tax on the ordinary income equal to the value of the stock when you received it. That income would be added to any other cost you incurred to acquire the stock and would be the cost basis reported when you sold it.

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