If Section 1402 applies, you will want to enter as Miscellaneous Income so the Schedule C is not needed/ no social security/Medicare tax. Instead of entering as a 1099-NEC, Enter under Miscellaneous Income. (I would use "Section 1402 Village payment" as the description.)
If you want to challenge the classification, see Independent Contractor or Employee? or contact the Village directly for an explanation.
Internal Revenue Code section 3401(c) indicates that an “officer, employee, or elected official” of government is an employee for income tax withholding purposes. However, in some special cases the law or a Section 218 Agreement may specify otherwise.
Regulations for section 1402, addressing the applicability of self-employment tax, indicate that performance of the functions of a public office does not constitute a trade or business. Therefore, holders of “public office” are not subject to self-employment tax.
See Tax Withholding for Government Workers
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