Consultant question

Forum|Forum|4 years ago
February 6, 2022
1 reply
3 views

Hello, in 2019 and 2020 I worked as a consultant for a firm and vested in shares with a declared par value. In 2021, the company was sold and I was issued a 1099-B for the proceeds I received. Can I offset this income with the time and expenses I incurred doing my consulting with this firm?

ColeenD3

Level 15

It depends. Were the shares your actual compensation?

pgjordanAuthor

Level 2

yes.

ColeenD3

Level 15

Yes, if you were an Independent Contractor. Report the income on Schedule C.

Please see this answer from MarilynG1

The Stock you receive in lieu of pay has the value of wages you would have received.

Say you did $1000 work for the company and you receive 10 shares of stock, then each share has a Cost Basis to you of $100.

n general, the tax treatment for stock received as compensation for your services -- that is, stock in lieu of pay -- is the same as for regular pay.

You must pay income taxes on the fair market value of the stock you received. Say an employer gave you 100 shares of stock in lieu of pay, and on the day you received the shares, the stock was trading at a price of $40. You've received the equivalent of $4,000 in income, so you'll be responsible for paying taxes on $4,000 in income. How much that tax will be depends on your tax bracket.

If you're a contractor or a self-employed person and receive stock in lieu of pay from a customer or client, the market value of the stock is treated as business income.

When you sell the stock, keep a record of your previously calculated Cost Basis to determine any Capital Gain or Loss from the sale.