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.
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:
That's definitely good news, but why did they issue a 1099-NEC instead of a 1099-MISC?
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.
It depends. Since stipends are awards not subject to FICA taxes, there is a better way to report this.
To verify stipends aren't subject to FICA/SE taxes, please visit the following Turbo Tax source.
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).
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.
@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.
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!
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).
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.
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.
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.
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?
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:
You can do that or you can simply enter cash rental income by selecting 'Cash, checks, Form 1099-K, etc.'. As long as all of the rent is entered on your Schedule E, then you are covered. Keep your documents showing why you received the payment so if you do need to explain to the IRS later, you will have all you need.
Hi, I am back.
how can I reach out the 1099-nec issuer to ask them for the correction? I was trying to call the IRS but they are not receiving calls.
You would have to contact the agency listed on the Form 1099-NEC, but it's not really necessary since you know what the payments are for and you include them in the rental income. If you feel better you can contact them, but they may not be willing to reissue on a Form 1099-MISC. By contacting them it may make them think about their reporting procedure next year which would be good.
Keep the information with your tax return as I indicated and there's no need for concern. You have lease agreements, you have proof of payment for rent, not a self employed business (residential rental is not the same thing and the income is not treated the same).
@Guwei6263
My wife had a small sole-propreitor business but closed it at the end of 2020.
In 2021 she did some paid consulting work in a related field, and received a 1099NEC.
I tried the work-around you describe here (putting that income as "miscellaneous" but TurboTax apparently detects the business from 2020, and still shows that income under the "business."
For us it's not the SE tax per se (although it seems ridiculous for a person age 75 with retirement income reflected on the same return) but the fact that it perpetuates a record of a "business" that no longer exists. So I guess there's no way to avoid that?
Technically, your wife received self-employment income in 2021, which is why it should be reported on a Schedule C.
Generally, for tax purposes, self-employment income includes any part-time business or "side work" performed in which she is in business for herself, rather than another person. She is also considered self-employed and needs to file a Schedule C if she engages in business-like activities where she intended to make a profit. This would include money received from doing consulting work.
Since the consulting work is for a related field, you can use the same Schedule C that was in your 2020 return.
Following your instructions to put data for 1099-NEC by indicating this is from sporadic activity or hobby (this is not common). But, Turbotax premier software still shows Self-Employment income tax rate (I tested different indications, no changes from Federal Tax Due. Is that possible there is a software bug from TurborTax Premier?
Did the way as you suggested. However, I don't see any difference from Federal Tax Due by checking 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.) or other boxes. How do I know the income will not be subject to self-employment tax? I expected Federal Tax Due should reduce by checking that box comparing to other boxes.