This is clearly an error. Your 1099 should reflect only the $500 you received for your work.
You should contact the issuer of the 1099 and ask them for a corrected tax document.
*** I am NOT a tax expert. I am a seasoned TurboTax user, and volunteer to provide assistance to TT users. Nothing I post is to be considered TAX ADVICE; I bear no legal liability for responses.***
