What this line means
The amount of excess golden parachute payments made to you during the year. A golden parachute payment is compensation paid to a key employee or highly compensated individual that is contingent on a change in corporate ownership or control. The “excess” portion is the amount that exceeds the individual’s base amount — the average annual compensation over the five tax years before the change. This amount is subject to a 20% excise tax under IRC Section 4999 on top of regular income tax. 1
Does this apply to you?
- You received a payment contingent on a change in ownership or control of a corporation and the amount exceeded your base amount
- You are a corporate officer, shareholder, or highly compensated individual who received severance or acceleration of compensation tied to a merger, acquisition, or similar transaction
- You received a 1099-NEC with an amount in Box 3
Easy to overlook
The 20% excise tax is separate from income tax The excess parachute payment is taxed twice: once as ordinary income (reported on your return like any other compensation) and once with a 20% excise tax under IRC Section 4999. The excise tax is reported on Form 4720 and is not deductible. The total effective tax rate on excess parachute payments can exceed 55% when combined with federal income tax and state taxes. 2 IRC Section 4999 — excise tax on excess parachute payments
This box is new for 2025 on Form 1099-NEC Before 2025, excess golden parachute payments were reported on Form 1099-MISC. Starting with the 2025 tax year, they moved to Box 3 of Form 1099-NEC. If you received a similar payment in a prior year, it appeared on Form 1099-MISC.34 IRS Instructions for Forms 1099-MISC and 1099-NEC — Box 3
Watch out for this
Not filing Form 4720 to pay the 20% excise tax on the excess portion. The payer reports the excess amount in Box 3, but the excise tax is your responsibility to calculate and pay. The IRS matches Box 3 amounts to Form 4720 filings. If you received excess golden parachute payments and did not file Form 4720, the IRS will follow up.
Footnotes
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IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025), Box 3. https://www.irs.gov/instructions/i1099mec ↩
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IRC Section 4999, Golden Parachute Payments. See also IRC Section 280G (disallowance of deduction for excess parachute payments). ↩
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IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025), Box 3: “Enter any excess golden parachute payments.” https://www.irs.gov/instructions/i1099mec ↩
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IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025), confirming excess golden parachute payments moved from Form 1099-MISC to Form 1099-NEC Box 3 for 2025. https://www.irs.gov/instructions/i1099mec ↩