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Retention bonuses are considered to be wages and must be reported on Form W-2, with appropriate tax withholding. Since this income was reported on Form 1099, you will need to pay Social Security and Medicare deductions as well as federal/state taxes on this income.

Although you received Form 1099-MISC, you should enter this as if it was Form 1099-NEC. Follow these steps:

Open your return and go to Wages & Income >> 1099-MISC and Other Common Income >> Income from Form 1099-NEC.

1. Add the employer and income information from the 1099.
2. Enter "Wages reported on Form 1099-MISC" as the reason.
3. Under "Does one of these uncommon situations apply?" check the box for "Taxpayer's employer reported this extra money on a 1099-NEC but it should have been reported on a W-2."
4. On the page "Filing Form 8919," check the box for "Taxpayer received a Form W-2 and a Form 1099-NEC, but all the income on this Form 1099-NEC should have been included on Form W-2."
5. In most cases, you have NOT filed Form 8919. Follow the prompts and TurboTax will prepare this form for you.
6. Note that you will owe Social Security and Medicare on these wages since your employer did not withhold them for you.

Now go back to the topic for Income from Form 1099-MISC and delete the entry you made previously that generated Schedule C. You'll also need to visit the Self-Employment Business list and delete the related Schedule C business.

The easiest way to find any section of TurboTax Online is to go to Tax Tools in the left column >> Tools >> Topic Search. Type in your topic, click the topic in the list and then GO to go directly to the start of that section. In TurboTax Desktop, use the Search box or Topic List found in the header.