1099-NEC for stock from closed business

[Anonymous]

My previous employer had setup a separate, employee owned company years ago and issued stock to most of the employees (at no cost to us). This separate company never went anywhere and was closed in 2022. I received a payment for the stock I owned and also received a 1099-NEC for it. 

Is this one of those cases where that should have been reported as a W2 instead? I did not receive a W2 from this separate company.

Additionally, I'm confused if that makes me an employee of that secondary company or not. I would think so, since the idea was that it was to be an employee owned company and I received stock. In that case, TurboTax is asking me to fill out Form SS-8 since I didn't get a W2 from that company. Does that all sound right?

[ThomasM125]

If you didn't perform services for the company, then you shouldn't report wage income from that company. I think you mean you worked for another company and they gave you the stock in the company that went under. In that case, the value of the stock when you received it should have been included in your wages from the company you worked for. The money you received now is from the liquidation of the stock which should be reported on a form 1099-B. You should report it as such as an investment sale on your tax return.

[Anonymous]

Thank you for your reply! Yes I worked for Company A. They set up Company B and gave everyone stock for Company B. Company B never went anywhere and was closed. I got a check and a 1099-NEC from Company B. I got a regular W2 from Company A.

Are you saying the value of the stock should have been on a W2 from Company A the year it was issued? Is there a certain box that would be under?

[ThomasM125]

Yes, exactly. It would have been reported in box 1, wages. There should have been a note about it in box 14. It is compensation to you which is considered wage income, since you are an employee of Company A.