It depends. It should have been included in wages subject to FICA taxes. When an employer gives you a reward (cash, points, or a gift card), they are legally supposed to
- Add the amount to your W-2.
- Withhold your share of FICA (7.65%).
- Pay their share of FICA (7.65%).
Instead, they avoided paying their share of FICA by issuing the 1099 MISC.
In the 1099 MISC interview, you can avoid paying FICA taxes by answering two questions.
- When asked "Does one of these uncommon situations apply?", look for an option that says "This was a prize or award from a payer who was not my employer" or simply "None of these apply. Note: Even though it is from your employer, choosing the "prize/award" path prevents the self-employment trigger.
- Did you have an intent to earn money? This would be hard to answer no since this was a work-related event.
My recommendation is to treat this like a work-related event and pay the SE/FICA taxes to avoid any scrutiny from the IRS. Answering those two questions above untruthfully is not the best practice in this case.
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