How to report "severance" bonus NOT on W-2? 1099? Other?

Discussion in 'Tax' started by sinc720d, Feb 3, 2004.

  1. sinc720d

    sinc720d Guest

    A company I worked as an executive for in 2003 was sold to
    another firm. On thh official date of the sale of the
    company, my position was done away with and I no longer
    worked for the "new" company - but I received 2 different
    "severance" payments.

    1) I received a series of normal payroll checks from the
    "new" company in accordance with an employee agreement /
    severance package. These were all reported as normal W-2
    income and had payroll deductions.

    2) I received a lump-sum bonus payment from the INVESTORS
    in the old company, not from the old or new company
    themselves. No taxes were withheld and (to date) I have not
    received a 1099 or other tax-related document from them.

    MY QUESTION HAS TO DO WITH #2 ABOVE.

    How (exactly what IRS form and line item) should this
    lump-sum bonus be reported? My guess is a 1099-MISC under
    Line 7 - Non-employee income and that it should be reported
    as "wages" - as opposed to "business" or "farm".

    (I should note that I do not think that this "bonus" would
    be seen as a "golden parachute" as the amount was roughly
    1/10th of my yearly income.)

    I also incurred a decent amount of legal fees regarding
    these transactions, so am I better off reporting this as
    some sort of "consulting income"?

    I appreciate any and all suggestions on what makes the best
    "tax" sense.

    Thanks!

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    sinc720d, Feb 3, 2004
    #1
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