Received 1099-NEC, but I am not self-employed

[eric_ell]

My company merged with another company and I received some phantom "stock" shares (https://www.investopedia.com/terms/p/phantomstock.asp) , and I received a payment from this in 2021.  I was provided with a 1099-NEC form for this payment.  There is only an amount in box 1 (Nonemployee compensation) of the 1099-NEC form, and boxes 2-7 are blank. 

- Within the Income section, I've entered this as "Income from Form 1099-NEC". 

- I then put  "Phantom Share Payment" as the description

- And "None of these apply to me" as the response to: Does one of these uncommon situations apply?

I'm then directed to create a New Business that generated this income using Schedule C.  This doesn't apply to my situation as there wasn't any self-employed business that generated this income.  What is the correct way to report this income? 

[KrisD15]

The Form 1099-NEC was resurrected because the IRS did not know for sure if a 1099-MISC reported Self-Employment income. 

Form 1099-NEC is for reporting Self-Employment income ONLY. 

You cannot report it any other way in TurboTax. 

You will need the 1099 form corrected to be 1099-MISC or enter it as a 1099-MISC in TurboTax and be ready if the IRS inquires.  

[DanP0428]

Federal
Income and Expenses

Other Common Income
Form 1099-NEC

Put reason for 1099-NEC

and chose that this is non earned as employee or self-employed individual, it is from a sporadic activity

[eric_ell]

Thank you very much for the replies, @KrisD15 and @DanP0428 .  I'll start by inquiring with my company about why I was issued an NEC form instead of MISC.  I also received a payment for these phantom shares in 2020, but received a 1099-MISC for that payment.  Not sure why they provided an NEC form for the 2021 payment.

I owe almost $1000 more when entering it as NEC, as opposed to MISC.  So I'm glad to hear that it should be a MISC form.

Thanks again for the quick replies.

[rose_agilo]

received shares on 1099-NEC from new joint venture company, how do I show these in turbo tax?  

[DaveF1006]

This is taxable income and you would report this on Schedule C as if a business so that FICA taxes can be paid on the distribution of those shares. 

1. Go to federal>income and expenses>
2. Self-Employment>Self-employment income and expenses

@rose_agilo

[ksmith85048]

I am having a similar issue. What is the likelihood of paying penalties to the IRS if you are able to back yourself?

[ThomasM125]

The IRS would likely assess a penalty for late payment of tax if that is what happend and they discovered it.

Stock given to an employee would likely be considered wage income regardless of how it was reported to the worker. As such, it should be subject to social security and income tax. However, your employer should be responsible for half of the social security tax so it is posible the IRS would simply assess you income tax and half what you would pay for self-employment tax. So, if you reported it as Other Income you would be shorting the government out of about 8% of the tax that should have been paid in. If you report it as self-employment income, you are overpaying about the same amount. You need to take that into consideration given the amount of money involved to see which way you want to treat it.