1099-NEC for Vacation Payout from Prior Employer

[ieiepop]

I received a 1099-NEC from a creditor, investor of my prior employer, which closed in June 2024. The creditor/investor’s company processed vacation payouts for us and issued the 1099-NEC. In TurboTax, should I report this on Schedule C? The payout is related to my vacation, not self-employment, and I am not an employee of the creditor, investor.

I would appreciate any guidance on how to properly report this in TurboTax.

Thank you for your help.

[Vanessa A]

No.  This would not be considered self-employment income.  Vacation pay should be reported on a W-2, not a 1099 -NEC as it is subject to employer withholding/ FICA taxes.  

You can report the income by selecting the following:

1. Income
2. Miscellaneous Income
3. Other Income not already reported on a Form W-2 or 1099
4. Yes, to did you receive any other wages
5. Continue through until you get to Any Other Earned Income and select Yes
6. Select Employee compensation that was not reported on a W-2
7. Continue through answering the questions.  Put a checkmark in the box that says you received a 1099-NEC
8. Select letter H- I received a form 1099-NEC that should have been submitted on a W-2

TurboTax will then include form 8919 with your return for uncollected Social Security and Medicare wages.  This will have you pay 7.65% which is the amount that should have been withheld, instead of 15.3 which is the self-employment amount.