W-2 wage income is subject to income tax computed on IRS Form 1040.
The IRS presumes that 1099-NEC income is self-employment income that is subject to:
- Self-employment income computed on Schedule SE, as well as
- Income tax computed on IRS Form 1040.
Income on 1099-NEC not reported to the IRS will likely prompt an inquiry from the IRS.
IRS 2022 Instructions for Forms 1099-MISC and 1099-NEC page 7 states:
Specific Instructions for Form 1099-NEC
File Form 1099-NEC, Nonemployee Compensation, for each person in the course of your business to whom you have paid the following during the year. At least $600 in:
- Services performed by someone who is not your employee (including parts and materials) (box 1); or
- Payments to an attorney (box 1).
Both self-employment income and wages should meet the income requirement for the Earned Income Tax Credit.
If you are concerned about being treated as a private contractor versus an employee, you may want to explore IRS form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
See also here and post about this process if you have further questions.
[Edited 1/25/2023 | 4:05 pm PST]
@Rachel32
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