They are giving you a 1099-NEC because it's required by law.
When you review the items, you are providing a service in exchange for something of value.
This is "compensation" (or "work") under US tax law and it is why you are taxed on the income the same as any other contract worker. Tax law does not distinguish much between cash and non-cash compensation. It does not matter if Amazon or another party funds that compensation. In the end, you are the person being compensated and that compensation is taxable.
This type of compensation requires that you report the income as a "business" or self-employment income, even though it doesn't meet all of the traditional hallmarks of a business in the common way of thinking. That's true for many self-employment endeavors.
The marker on Amazon that you're reviewing "free products" doesn't have anything to do with the tax law but likely addresses other regulations that Amazon is required to follow that require that they identify reviews where the reviewer is compensated.
If an item regularly sells for less than the value assigned to it for your compensation, you may be able to make some manual adjustments to the prices on your Schedule C - but this should be done with some caution.
If you do this, you should plan to keep detailed records of the price of the item over time (you pay want to print out the listing with the lower prices over a period of a few months to show that its value was less than what was stated in your tax documents.) This will help bolster your claim to adjust the income for that item.
Participants in programs such as this should weigh whether or not the tax obligations and reporting responsibilities that go along with it are worth the value of program participation.
@mckernan75
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
