I think the school should have reported the bonus on a W-2, even though you were no longer an active employee, and they should have withheld Social Security and Medicare taxes, as they would have if it had been reported on a W-2.
You can report the bonus on your tax return as additional wages that were not reported on a W-2. You will pay income tax on it, and also the Social Security and Medicare taxes that the employer should have withheld. You will pay the same amount that you would have paid if your employer had reported it on a W-2.
The bonus will be reported on Form 1040 line 1g. Form 8919 will be included in your return, with reason code H in column (c). Form 8919 calculates the Social Security and Medicare taxes. The total of these taxes will appear on Schedule 2 line 6 and will be included in your total tax liability.
In TurboTax, do not enter the 1099-NEC. Here's how to enter the bonus in TurboTax.
- Go to Federal Taxes > Wages & Income.
- Click "I'll choose what I work on."
- On the screen "Your 2024 Income Summary," scroll all the way down to the last section "Less Common Income." Click the Start button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
- On the next screen click the Start button for "Other income not already reported on a Form W-2 or Form 1099."
- The next screen asks "Did you receive any other wages?" Select Yes and click Continue.
- The next three screens ask about household employee wages, sick or disability pay, and Medicaid waiver payments. Click Continue on these three screens without entering anything.
- The next screen asks "Did you earn any other wages?" Select Yes and click Continue.
- The next screen asks the source of the other earned income. Select "Employee compensation that was not reported on a W-2." Click Continue. Ignore the note that says not to enter payments for which you will receive a 1099.
- On the next screen, "Employee Compensation Not Reported on a W-2," click Continue.
- If you are filing a joint return, you will get a screen asking which one of you the income is for. Select your name and click Continue.
- On the next screen, "Report Your Wage Income," enter the employer's name and EIN from your last W-2. For Total Wages Received, enter the total amount of the bonus that you received for the year. Check the box that says "I received a Form 1099-MISC for this income." For the Reason Code select "H - I received a Form W-2 and a separate Form 1099-MISC and/or 1099-NEC and the income should have been reported on Form W-2." Click Continue.
- Read the next screen, "Report as Wages," and click Done.
