Non-Employee Stock Options

Forum|Forum|5 years ago
January 31, 2021
8 replies
52 views

A client was distributed stock options from a bank he was an investor, but not an employee. The bank sent him a W2 form with box 1 and box 2 as the same amount for the stock options. I know this isn't right, but what form should they have issued the stock options on since he was not an employee? I was thinking 1099-B, but I know options are handled differently.

FYI - I do business bookkeeping for him for a separate business and prepare both the corporate and personal tax returns for him. I'm trying to tell him the correct form he needs to tell the bank that issued them instead of the W2.

ProSeries Professional

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Just-Lisa-Now-

Intuit Community Champion

Did he sell what they gave him? If so, Id think a 1099B would be arriving soon.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

D

DeveraCAuthor

Level 4

Not exactly. He was asked to join the board of a bank 18 years ago. At that time he bought stock as a non-employee, merely a member of the board. The bank was sold in late 2019 and they issued the stock options in January 2020. He was never an employee in the 18 years, just a member of the board. So why would they issue him a W2 where box 1 (wages) was the amount of tax profit and in box 2 (federal taxes withheld) they put the same amount?

I've told him to go back to the bank and see if actual taxes were withheld (which I do not think they were.) I told him I thought everything should come on a 1099B, but it doesn't seem that is the case at this time.

AHHHHHHH!!!

Just-Lisa-Now-

Intuit Community Champion

yea, that's a weird situation that's out of my league sorry!

The W2 with wages and fed w/h the same amount seems really odd, I think the program is going to holler about the withholding being so high and not allow E filing either.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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Ephesians3-14

Level 7

Wait - you said Box 1 (Wages) and Box 2 (Federal tax withheld) are the same? How can that be? Was that a typo in your original post?

In this situation, I've usually seen a W-2 issued, so I don't think that's a big deal. Just report it as such.

He'll also get a 1099-B, so be sure to adjust his cost basis for the "spread" between the FMV on the date exercised/sold (I assume he sold the stock) and the option price.

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DeveraCAuthor

Level 4

It wasn't a typo. That is what struck me as weird. So, I have him going back to the payroll company of the bank to see if taxes were actually withheld and if so, if that amount is correct. The whole thing is weird to me. I know when someone is an employee they typically get a W2 and 1099-B, but with him never being an employee but just a board member, I thought it might be handled differently.

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