1099-NEC but not self employed

[john8791]

My wife is a preschool teaching assistant.  The school participated in a program called Iowa Wages which you apply to receive additional compensation.  It's meant to be promote people in these jobs.  The extra compensation turned out to be about $900 and she just received a 1099-NEC.  As I read it, the 1099-NEC reports money as if you own your own business or are a contract worker. It may even require us to make estimated quarterly tax payments.  She is not self employed nor an independent contractor.  I don't know how to treat this in TurboTax.  Any help would be appreciated.

[LeonardS]

Yes, your wife is required to report the extra compensation on your joint tax return.  You will enter the extra compensation of $900  as other income that is not subject to self-employment tax.

To enter the $900 sign in to your TurboTax account if it is not open and follow these steps:

1. Select Income & Expenses.
2. Scroll down to Less common income and select show more.
3. Scroll to the line Miscellaneous Income, 1099-A, 1099-C, and check start.
4. On the page Let's Work on Any Miscellaneous Income scroll to the line Other reportable income and click start.
5. On the page Any Other Taxable Income select yes.
6. On the page, Other Taxable Income enter the description (Extra Compensation) and amount.
7. Select continue.
8. Select done on the next page

[john8791]

That's definitely good news, but why did they issue a 1099-NEC instead of a 1099-MISC?

[john8791]

@LeonardS

I have some new information and I don't believe I can do it the way you said.  I found out the money my wife was paid from the Iowa Wages program is considered a stipend.  She is not self employed but I believe she has to pay at least half of the SE tax?  I went through the business section in TurboTax Premier but most of the questions make no sense as she really doesn't have her own business.  I am really lost on how to accomplish this in Turbotax.

[DaveF1006]

It depends. Since stipends are awards not subject to FICA taxes, there is a better way to report this.

1. Go to federal>income and expenses>all income>>show more 
2. Go to other common income> StartForm 1099-NEC>Start
3. The first screen will ask for a description.  Here indicate this is for a stipend.
4. Next screen. Does one of these uncommon situations apply? Indicate this is from  sporadic activity or hobby (this is not common).
5. Finish the section
6. This will now be listed as other income but will not be classified as Self-Employment income nor will you be charged FICA taxes.

To verify stipends aren't subject to FICA/SE  taxes, please visit the following Turbo Tax source.

[hiply_2022]

Is a non-qualified 100% Joint & Survivor annuity subject to SE/FICA tax?   When my husband died last summer, his pension annuity went to me (as the beneficiary).  His former employer sent him a W-2 (for monthly payments to him in 2021 up to his month of death) and sent me a 1099-NEC (for monthly payments that went to me, after he passed away).  

[ThomasM125]

I am sorry for your loss.

Can you clarify if the W-2 form shows social security wages in box 3 and Medicare wages in box 5, along with taxes withheld in boxes 5 and 6?

If not, then the income is not subject to social security and Medicare taxes, and as such should not be subject to self-employment tax. Otherwise, the issue needs more examination.

[RobertB4444]

@hiply_2022  Different annuities have different structures and different rules.  I would start by consulting with the folks who issued the 1099-NEC to be sure that the form wasn't issued in error.  Then, if it was not, I am afraid that it seems likely that this annuity requires that you pay self-employment tax on the proceeds you receive.

[hiply_2022]

Thank you... my husband's W-2 form does NOT show social security tax or Medicare tax withheld.  Boxes 3-6 are $0.00. There IS Federal income tax withheld in Box 2.  

For my 1099-NEC, there IS federal tax withheld in Box 4. I appreciate your thoughts!

[hiply_2022]

Thank you - I've consulted with my husband's former employer and it is their standard procedure to issue 1099-NECs to the surviving spouses (if they were never employees).

[ThomasM125]

The income is not subject to self-employment tax, as that is only applicable to business activities. 

In TurboTax, you should enter the form 1099-NEC in the Other Common Income section, which is in the Federal section of TurboTax where you see Income and Expenses. Look for Income from a Form 1099-NEC.

Enter the form as stated. For the description, say it is a survivor's annuity. On the screen that says Does one of these uncommon situations apply? check the box that says This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common.) That way, the income will not be subject to self-employment tax.

@hiply_2022

[hiply_2022]

Thank you, that makes sense.  My question is that if I'm subsequently sent a 1099-NEC by my spouse's former employer every year thereafter, will I continue to report it as Uncommon income from a hobby or sporadic activity?    Apologies for jumping onto this thread with this new, separate question earlier.

[DianeW777]

Yes, you should treat it the same if it is issued on the same document.  If you receive a different tax document in 2022, you can ask to see if there is a different treatment.

@hiply_2022

[Guwei6263]

Hi, thanks for your help. 
I received 1099-nec. But it is wrong form. I should receive 1099-misc. the reason is that I have a rental property and the Tenant Could not pay the rent. They applied house assistance from the government in Oct 21.  Few weeks later a $7000 direct deposit to my bank account. 
This year 2022, I received 1099-nec for $7000 in box 1. This is wrong. This amount should be showed in box 1 (rents) of 1099-misc and I should receive 1099-misc to reflect the rental assistance. 

what should I do?

[JulieS]

The Ideal solution would be to contact the payer and get the form reissued as a 1099-MISC.

Regardless of whether your can get the form corrected, this payment was a substitute for rental income and it should be reported as rental income on your tax return. 

Here is how to do that in TurboTax:

1. Select Federal from the left side menu.
2. Select Wages and Income toward the top left
3. Scroll down/ expand the list and look for Rentals and Royalties.
4. Expand that section and find Rental Properties and Royalties (Sch E).
5. Click Start on the right.
6. Answer the first question Yes.
7. Select Rental property on the left, click Continue.
8. Enter the basic information about your rental, if you haven't already.
9. When you get the the Income section on the rental schedule, select Cash, checks, Venmo/PayPal, and/or Form 1099-K.
10. Click Continue.
11. Enter the amount from the 1099-NEC here and proceed with your rental schedule as normal.