Proceeds from sale of company

[Wonmarco]

Hi,

I worked for a startup that was sold to Experian. I received a payout in three payments that was a % of the sale price of the company  (not a huge amount). The first payment came from the company I worked for after the sale closed. Payments 2 and 3 came from Experian. Experian sent me a 1099-misc for the payments they made.

Is this considered income subject to self employment tax? I was not working for either company when the payments were made.

Thank you!!

[MaryK4]

No, it would not be considered self- employment income unless the payments were for services (related to the actual sale because you did not work for Experian).  If you were an owner of the startup, you may be able to enter as a capital sale (which may have a favorable rate).  If not, you could enter as Miscellaneous income.  

[Wonmarco]

Thank you!! Follow up question. How do I report it on my tax return? Do I not include the 1099-misc and enter the income another way? 

[MaryK4]

Yes, you can enter under Less Common Income select Miscellaneous Income, 1099-A, 1099-C
 

• On the Let's Work on Any Miscellaneous Income page, select Start to the right of Other reportable income
• On the Any Other Taxable Income? screen, select Yes
• On the Other Taxable Income screen enter the description "1099-MISC Experian," then the amount.  Select Continue
• On the Other Miscellaneous Income Summary screen, select Done

@Wonmarco 

[Wonmarco]

Thank you!!