How should I file a 1099-NEC that was issued by my employer (where I am a W2 employee) for shares of restricted common stock that vested in 2022?

[golden2201]

I received a restricted stock grant from the company where I am currently a W-2 employee and have been employed for several years. The restricted stock was vested immediately when issued. I received a 1099-NEC from my employer for the value of the stock, listed in box 1. Upon confirming with our company representatives, I was told this is how the company reports issuance of common stock. I'm unsure if this is common practice as I can't find much information about common stock being reported on form 1099-NEC when you are a W2 employee at the company.

This is the first time I've received a restricted common stock grant that are not stock options. When entering the 1099-NEC into TurboTax, it's asking to identify the business income on Schedule C. How do I ensure that I am reporting the restricted common stock I received on my return properly and what should I be aware of for future stock grants that will be issued?

[ThomasM125]

You are correct, the income you describe is wage income and as such it should be reported on a W-2 form, in box 1, but your employer may not agree to correct the reporting on it. If not, you can report the 1099-NEC income as a temporary activity not related to your work when you see the questions TurboTax asks after your enter the Form 1099-NEC,  and it will be entered as Other Income. This is not techincally correct, but it may result in the correct tax on your return. 

Your other option would be to choose, in the Less Common Income section of TurboTax,  Miscellaneous Income, 1099-A, 1099-C. You will see an option that says Other income not already reported on a Form W-2 or Form 1099. Work through that section and you will come to a screen that says Enter Source of Other Earned Income and choose the option that says Employee compensation that was not reported on a W-2 form and proceed through the rest of the section to enter your compensation.

If you do this, you still need to enter the form 1099-NEC as other income, but then enter a negative adjustment to income to cancel it out as follows:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Find Less Common Income in the list of income sources
4. Use the Show More option to expand the choices and choose Miscellaneous Income, 1099-A, 1099-C
5. Choose the Other Reportable Income option and find Other Taxable Income in that section
6. Enter a description for your entry and the amount as a negative number