1099 Issue

Box 6 is for Medical and Health Care Payments.

Doesn't sound like the right box to me, but I don't know what the deal was. Was this "part of the sales proceeds" or some sort of medical insurance coverage? Sounds like the former, so box 7 seems correct (Services performed by someone who is not your employee).

Why don't you ask "The accountant for one of the employees" to support his statement?

And Box 3 is for "other income payments". (not sure if your slipped a digit between box 3 and box 6).

Would box 7 suggest SE tax is due, and box 3 would not? But wasn't this payout due to the services provided by the ex-employees?

At this point I don't know the basis - it seems to me as if it would be in the nature of a bonus.

That was exactly my thought.

That is my thinking, it's a bonus, and perhaps should have been reported on a W-2.

It often happens in the tech business that a corporation is sold, the employees own stock, but their stock class has a value of zero at the time of sale. In this situation it is common to give some of the proceeds to the employees as a bonus, perhaps proportionate to their original stock positions. This is called a "carve-out". Pretty sure it's a W-2 event.

Steve

Sounds like "the accountant for one of the employees" doesn't know what the deal was, he just wants his client to pay less taxes.