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Taxpayer receives Offer for Shares in C Corp

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    Taxpayer receives Offer for Shares in C Corp

    Taxpayer as an valuable employee receives an offer from Employer - which is a C Corp
    Purchase agreement is for 2 shares of Stock in C Corp - payable over 10 years
    Taxpayer remains as an employee receiving W-2 form for Wages

    C-Corp is going to distribute an amount "gross up" for the purchase of the shares (annual amount of payment - over 10 years - base purchase amount approximately $ 20,000) plus what the Employer calculates as taxes on this amount.

    My question is communicating with attorneys, etc, drafting all of these documents, A 1099 will be issued (confirmed they are not processing through payroll) will the 1099 be a "dividend" or "non-employee comp"

    Obviously 1099 Div is not subject to SE - however, 1099 Non Employee Comp will be subject to SE

    Trying to set up Estimated Tax Payments for 2017

    Thoughts

    Sandy

    #2
    Originally posted by S T
    Taxpayer remains as an employee receiving W-2 form for Wages ...

    ... will the 1099 be a "dividend" or "non-employee comp"
    There shouldn't be a 1099 at all. An employer can't report a portion of an employee's wages on a F-1099 and the rest on a W-2. The payments are additional remuneration, so they should be included on his W-2. Surely the employer will want to deduct the payments, so they aren't a dividend. Furthermore, how can there be a "dividend" of $20,000 on two shares of stock, unless there is a dividend of $10,000/share on all the other outstanding shares.

    The stock purchase bonuses will be additional W-2 wages, pure and simple.
    Roland Slugg
    "I do what I can."

    Comment


      #3
      Thanks Roland,

      Your outline is what I thought - should be through payroll, however, that is not the information I am receiving from the 3rd party setting up the Stock Purchase and attorney, question out to the Accounting Firm.

      Obviously I have no control - I am representing the Taxpayer and trying to plan for Estimated Taxes for 2017.

      Sandy

      Comment


        #4
        Originally posted by S T View Post
        Thanks Roland,

        Your outline is what I thought - should be through payroll, however, that is not the information I am receiving from the 3rd party setting up the Stock Purchase and attorney, question out to the Accounting Firm.

        Obviously I have no control - I am representing the Taxpayer and trying to plan for Estimated Taxes for 2017.

        Sandy
        Is this a stock option? If read your original post correctly the employee is "purchasing" the stock vs Corp "stock for services" which may take this scenario down a different path than a W-2 path scenario.

        But with the limited information given to you places you in a difficult planning situation. Think best approach is to get necessary information from the attorney (hopefully a Tax Attorney) as to the stock structure (strategy) being developed.
        Last edited by TAXNJ; 07-01-2017, 11:19 AM.
        Always cite your source for support to defend your opinion

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