I sold Class B shares to my ex-employer via a promissory note, repaid with interest. They issued a 1099-NEC for the full amount—should it be a 1099-INT instead?

[jm_la-ny]

I had purchased Class B Common Stocks while working at former employer. When I left, they repurchased that with a promissory note at the same value I had purchased + interest, that was paid this year, and I had the impression I would pay tax only on the interest, so I thought they should issue a 1099 INT. But they did actually a 1099 NEC with the total value of the note + interest. Is there a way to input a cost basis for that? Is this even correct or should they actually fix it with 1099 INT instead?

[ThomasM125]

It should not have been reported on a Form 1099-NEC, as that is for reporting non-wage income paid to individuals for services provided to a business. Since you sold stock, that should be reported on a Form 1099-B. Since you had a promissory note, the interest on that should be reported on a Form 1099-INT. 

[jm_la-ny]

So, just to make sure there's nothing left here. The company says they are correct and they cannot issue another document that is not the 1099 NEC. They said I should be able to input the cost basis (original amount) in order to find the interest, but a 1099 NEC does not have an entry for cost. 
What should I do in this case? 

[DianeW777]

Instructions below will show you how to report the income. Some companies don't seem to understand their reporting requirements because they can be complicated. 

The purchase of the Class B Common Stock should be entered as a sale of stock (usually in Form 1099-B). You will select as though you did receive a 1099-B and enter the cost, purchase date, sales price (promissory note amount) and date of sale. Choose to enter it a different way and enter it yourself (no import).

• Where do I enter my 1099-B?

Next enter the interest income for 2024. You should have an amortization schedule showing the interest, note amount/principal and total payment for each month for the term of the contract.

• Where do I enter my 1099-INT?

Reminder: You do not actually have these forms. Keep the 1099-NEC in your file with an explanation that it was the wrong reporting form for sale of stocks and interest paid on a promissory note.

@jm_la-ny