It would be best to correct the form 1099-NEC and issue the W-2. Whether you would get in trouble by leaving the 1099-NEC alone for 2022 and changing to the W-2 next year is hard to say, but since you reported the income, even though it was on the wrong form, that may work in your favor. However, the penalties for filing a 1099-NEC in place of a W-2 could be substantial, especially given you corrected it next year, which is proof that you were aware that it was reported incorrectly.
Whatever you decide, make sure you correct the 1099-NEC form if you decide to replace it with a W-2, as you don't want the income to be reported twice.
You can use TurboTax QuickEmployer forms to prepare a W-2 form. To correct your form 1099-NEC you have to secure a blank Form 1099-NEC (you can get one from an office supply store or order from IRS online) and mark the "Corrected Box" on the top of it and enter the amount as $0. Then, file copy A of it with a form 1096 to the address on the Form 1096.
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