Taxes!

[LondonBroil]

I recently got my W-2's from my job along with a Tele-File from the IRS. I was getting ready to call in my tax info tonight and my girlfriend told me that I had to include a stock check I got in the mail this year.

What happened is that I worked for a company for 3-4 weeks awhile ago, not sure how long. It seems within those 3-4 weeks the company went public and I received 42 shares of stock. After I had left this company, they sent me a letter asking me if I wanted to keep them or sell them and being relatively young (24), and in need of cash (needed a new compy), I sold.

They sent me a check for something like $1200-$1400 and I was good to go.

Now my girlfriend is saying I HAVE to somehow tell them about it or I go to jail? I'm not even sure that I received this check in 2002 and if I didn't, that means it's too late anyway. I never received anything from the company telling me I had to report it (I don't think) so if I DID have to do it this year, how would I?

Also, if I didn't report it, how would the IRS even know about it?

Any comments would be appreciated. /forums/images/icons/laugh.gif

[IrishHand]

I never received anything from the company telling me I had to report it (I don't think) so if I DID have to do it this year, how would I?
It's income - they don't need to tell you that. You're supposed to figure it out based on the fact that the gave you money. If you found $1200 lying on the street, you'd need to report that too.

Also, if I didn't report it, how would the IRS even know about it?
They probably wouldn't unless they audit you - in which case they could find out either because you cashed the check or because the company in which you held stock told them about it. Your girlfriend is a bit melodramatic - the penalty for failure to report income tends to be a fine, not a prison sentence. (There are exceptions, but you don't sound like one.)

In the end, you should probably report it. It's required by law, and it's the right thing to do. No, you probably won't get caught, but why take the risk over a relatively small amount of money that's not yours anyway?

[adios]

If the income was not reported and should have been in a previous year you can file an amended return for that year. Actually I believe you should have received some form regarding the transaction as I would think a 1099 but I'm not sure. Is it possible that it was part of your w2 compensation? It sounds like your taxes are uncomplicated which makes your chances of being audited almost nil.

[Ray Zee]

somewhere this transaction was reported. you owe taxes for the year in which you recived the stock, at its basis. then you owe on any gain from it upon sale. and may be able to deduct aloss if you did incur it. if you get caught you will owe taxes and penalties and interest. which by the time they do audit you will be more than what you got. you need to simply ask an accountant and not a bunch of poker players like us.

[John Gaspar]

Did you get a W-2 from this company in 2002? If you did, the earnings of the stock transaction may have been included in your income.

If you didn't receive a W-2 you should have received a 1099 form from the company showing the proceeds (profit) you made from the sale.

Either way you should report the income and pay taxes on it. If you don't the worst that will happen is that you will owe taxes, penalty and interest on the unreported income. The IRS is not going to throw you in jail for such an insignificant amount of money.