Get your taxes done using TurboTax

Incentive payments aren't considered regular income, so they're subject to different rules. They're reported in Box 3 on the 1099-MISC form as "other income," not on Form W-2 with other wages and payments from which taxes are withheld.

Report it as Other Income.

Follow these steps to enter the bonus. The first few steps might vary a bit in TurboTax Online, depending on what you have already done.

• On the left side click Federal.
• Click Wages & Income.
• Click "I'll choose what I work on" or "Jump to a full list."
• On the screen "Your 2021 Income Summary," scroll all the way down to the last section "Less Common Income." Click the Start button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
• On the next screen click the Start button for "Other income not already reported on a Form W-2 or Form 1099."
• The next screen asks "Did you receive any other wages?" Select Yes and click Continue.
• The next two screens ask about household employee wages and sick or disability pay. Click Continue on these two screens without entering anything.
• The next screen asks "Did you earn any other wages?" Select Yes and click Continue.
• The next screen asks the source of the other earned income. Select "Employee compensation that was not reported on a W-2." Click Continue. Ignore the note that says not to enter payments for which you will receive a 1099.
• On the next screen, "Employee Compensation Not Reported on a W-2," click Continue.
• If you are filing a joint return, you will get a screen asking which one of you the income is for. Select your name and click Continue.
• On the next screen, "Report Your Wage Income," enter the employer's name and EIN from your W-2. For Total Wages Received, enter the amount of the bonus. For the Reason Code select "H - I received a Form W-2 and a separate Form 1099-MISC and/or 1099-NEC and the income should have been reported on Form W-2." Click Continue.
• Read the next screen, "Report as Wages," and click Done.

How Bonuses are Taxed