Generally, the IRS classifies employment incentives as supplemental wages, along with bonuses, severance pay, taxable fringe benefits, vacation pay, back pay, and overtime. Supplemental pay is anything other than your husband's regular pay. Typically, supplemental pay is added to a W-2, such as regular wages are. This ensures that the proper taxes are withheld.
If supplemental pay is reported on a 1099-MISC in Box 3, then you will still need to pay the uncollected Social Security and Medicare tax, as well as the income tax. This could be why it is populating under your Schedule C and adding self-employment tax (which will end up being your portion of the Social Security and Medicare on this income).
Per the IRS, supplemental wages are subject to Social Security and Medicare taxes.
Please see IRS Publication 15 for additional information.
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