When I exercised the NSOs with my past employer, there was positive income. As a result, they issued me a 1099-MISC. This 1099-MISC is specified as "Box 7: Nonemployee compensation".
On the 1099-MISC is says: "Box 7 : ... You received this form instead of Form W-2 because the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax..."
According to this
http://thestartuplawblog.com/nonqualified-stock-options-tax-withholding/,
"it doesn’t matter if an employee left employment years ago. It doesn’t matter if the employee is no longer in your payroll system. If the option was granted in the context of employment, then you have to withhold income and employment tax withholding, even if the optionee is no longer an employee at the time of exercise. The character of the payment is wages.
It is important to get this right, because if you do not withhold the income and employment taxes from the employee, the company can become liable for those amounts to the IRS."
Note: I am running into immense hardship trying to file this exercise event via a 1099-MISC. After adding my 1099-MISC, the Turbotax software leads to questions that do not make sense for an Exercise event. Please help!
