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Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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I worked for a startup company that gave me stock as part ...

Customer Question

I worked for a startup company that gave me stock as part of joining the company. By the time I left the company all the shares had vested. There was no forfeiture when I left the company. 2 years later the company valued the stock and gave everyone an opportunity to sell half the stock grant at a substantal gain. Now I'm trying to figure out how to report this in Turbo Tax. The company gave me a 1099-Misc which seems like the wrong reporting form. All the income looks like ordinary income and is taxed at a much higher rate. How do I report this? Was it filed correctly by the company?
Submitted: 9 years ago.
Category: Tax
Expert:  Marvin,EA replied 9 years ago.
Hello and thank you for using Just Answer. You would have to find out what type of stock option you were granted. Two types of stock options, incentive stock options (ISOs) and options granted under employee stock purchase plans (ESPPs), are stock options plan produces capital gain or loss when sold. Can you find out if your stock options were granted under the (ISOs) or (ESPPs)?
Marvin,EA and 2 other Tax Specialists are ready to help you
Customer: replied 9 years ago.
I have the paperwork at home. I'll post an update later - around 8pm (EST).

Customer: replied 9 years ago.
Sorry - its taken a while to gather the details. The stock was not part of an ESPP nor was it options. It was more like a signing bonus that vested over time.

I spoke with the CFO of the company. I still don't understand how to categorize the original stock 'grant' but the reason it appeared on a 1099-MISC and not 1099 B is that the company didn't use a brokerage firm to issue the payments and wasn't able to file 1099Bs.

Not sure if I have any further questions - I am very concerned that I will be flagged for an IRS audit. I plan on pretending its a 1099 B and forcing it into Turbo Tax. And then preparing for the audit. Am I missing something?

Expert:  Marvin,EA replied 9 years ago.

Get a statement from your company about not being able to file any 1099Bs and keep it with your tax return. If the 1099-MISC is a large amount, you will be flagged and you will need a explanation about the 1099-MISC.