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This is indeed tricky. I can't address your situation. But here's one of my own. LLC, 2 members 50-50 owners, 1065 reporting. Bldg sold for 550k, basis 680k, debt 800k. Debt in LLC name, members as guarantors. No 1099-A or 1099-C issued. But bank sent letter stating that if bldg sold at the 550k price, they would release members from debt balance. Form 1065 has a question asking if any debt was forgiven so must answer yes. Since this is recourse, I'm showing sale at 550k minus basis 680k, loss of 130k. Cod income of 250k. Round numbers. On 1065, sch k will show loss of 130k, cod income of 250k. Each K-1 will show half, box 10 loss of 65k and box 11 code E cod income of 125k. Correct so far? On 1040, if memeber is insolvent, would full 125k be shown on 982 and zero out the cod income leaving the loss of 65k still showing on 1040. Or would I net this loss against the cod income, leaving 65k cod income and showing only 60k on the 982 as amount not included. Then the 1040 would show loss of 65k and cod income of 65k. This seems stange and I'm wondering how this gets reported and flows to the 1040 properly. Any help is appreciated.

You want the easiest, quickest way? Give the client $40 and send him over to the ex-employer to get his W-2. And then add $50 to your bill for your troubles. The others suggests are valid, but you asked for the most expeditious route.