ISO question

[genedoc]

I exercised some ISOs last year in sell to cover transactions.  I was not an employee last year but rather an independent contractor with the company but I had a preexisting contract that allowed me to keep my options despite not being an employee.  As a result of no longer being an employee, they had to convert my outstanding ISOs to NQ status and put the compensation from the exercise on my 1099-nec along with my billable hours compensation, which I have dealt with effectively in TT.  However I still received a W2 (I know, very wierd) from the company.  The W2 is blank (nothing in box 1) except for box 14 which shows ISODD and the amount of taxable gain from the ISO exercise (which, as stated, is already included in my 1099-nec and reported on the Supp info doc and 1099B as NQ).   I also received a form 3921 documenting the ISO exercise information.  The IRS will receive that wierd W2 and the 3921, which really don't apply to those ISOs since thery were converted to NQ's.  Do I need to do anything at this time?  thanks

[ThomasM125]

No, you reported the income associated with the discount when you entered the Form 1099-NEC income into your tax return. When you reported the Form 1099-B form you reported the stock sale proceeds and cost basis. The only thing you may have neglected to do would be to adjust the cost basis reported on the 1099-B form to include the income reported on the 1099-NEC form you received, assuming the cost basis reported was wrong. To determine the correct cost basis, you would need to add the cost of the shares acquired to the income reported on the 1099-NEC form and then divide it by the number of share acquired to determine the cost per share. Then, multiply that by the number of shares sold to get the cost basis that should have been reported on the Form 1099-B. If it is wrong, you will see an option to adjust it when you enter the Form 1099-B: