If I receive stock shares for free, do I need to report them as income? If so, which form?

[IsabellaG · Accepted solution]

It depends on why you were given the shares.

If you were given the shares as a personal gift, you would not report receiving the shares, but you would report the gain or loss on the shares when you sell them.

If you received them from your employer, this would be considered compensation.How the stock is taxed would depend on the type of award or grant involved. For instance, if the stock is "vested" at the time that you received it, then you are entitled to the full value of the stock at the time you received it. In that case, the value of the stock is taxable as income to you.

See this link for a discussion of employee stock grants. Please respond with a comment if you need more information. 

[shane-booth87]

I received the free shares for signing up with Robinhood trading app.  Not related to my employer.  Do I need to report them since they were free from Robinhood?

[IsabellaG]

According to the Robinhood website, <a rel="nofollow" target="_blank" href="https://support.robinhood.com/hc/en-us/articles/115002825066-Free-Stocks">https://support.robinhood....>, the cash value of the free stock at the time you received it may be reported as “Other Income” on a 1099-Misc form. Any gains or losses on the sale of the stock are reported as capital gains or losses. You will probably get the 1099 in the mail soon.

If you report the cash value as Other Income, then sell the stock at a later date, you would show the amount that you reported as your cost basis in the stock, so that you don't pay tax on that amount twice.

[shane-booth87]

So it sounds like I should report the free shares as other income on a 1099-Misc.  Thank you for the help!

[clairethomaspiczak]

I am in the same situation and I received a 1099-MISC for the free stock, and I reported it in the Wages and Income section; however, it is telling me that I need to report that income somewhere else too? It is prompting me to fill out a Schedule C form for the income as well but I didn't receive a schedule C...what do I do about this? 

[KathrynG3]

It depends. Please see this article about how to handle Robinhood issuing you Form 1099-MISC for stock.

You should not pay self-employment tax on this income. If you sold shares, then you need to:

1. Report the Form 1099-MISC as received in Other Income (see the link for steps)
2. Report the sale of the shares on Schedule D in the investments section (see the link for the steps).
   1. If the Form 1099-MISC is the amount you paid for the stock, this is the same value you would report as Cost Basis. 
   2. The Form 1099-B would likely only report the Sale with the Cost Basis as -0-. Use the amount in Form 1099-MISC as your Cost Basis since you already reported the amount on Form 1099-MISC.
      1. If you didn't do that, then you would pay tax from Form 1099-MISC, and pay tax again on the full gain.
      2. By entering Form 1099-MISC as the cost basis, you would:
         1. properly only pay tax on the difference between the amount on Form 1099-MISC and the amount received for the shares when they were sold.

[Anonymous]

Hi,

I got 2 free stocks from Webull last year, but they didn't give me a 1099-Misc. Would I be okay to do an amendment for last year to put in the 1099-Misc manually for the stocks I got for free? Thank you for the help

[DianeW777]

Yes. This would be reported as 'Other Income' and you can use the following instruction to enter the income.  As a reminder the amount you include in income on your return will be the cost basis of the stock when you sell it.

Open your TurboTax return:

1. Click Wages & Income at the top
2. Scroll down to Less Common Income. Click Show more
3. Start Miscellaneous Income, 1099-A, 1099-C
4. Start Other reportable income
5. Say Yes to Any Other Taxable Income?
6. Enter a description and amount

[NikkiMin0515]

Hi i received 2 free sign up bones stock in 2020 from "We bull" and i sold them same year. Is it going to be short term gain since its sold with a year or it will consider long term gain?

Also in Turbo Tax will it be added in stocks and bonds section and treated same as other stocks what we purchase and sell in a year? Thanks 🙂

[Critter-3]

If you held the stock less than a year it's short-term and it's treated just like any other stock sale that you made. You should see it on the 1099-b for the sale and a 1099 - misc for the gift of the stock. Read the rest of this thread to know how to handle gift basis.

[NikkiMin0515]

Thanks so much 🙂

[NikkiMin0515]

Kindly check webull brokerage reply.. I dont know why they are considering long-term. "Per our clearing firm who provides and produces our tax documents, "The positions came into account as stock referral's and the Cost Basis provided to update was showing the transfer type as "INH" (inheritance). The tax lots marked as INH will be reported into the Long Term Gain Loss section."

[GK04]

what should I even in description for the free stock?

[ThomasM125]

@GK04 Promotion Stock shares would be a good description.