1099-NEC sent from $1,000 teacher cares act payment. Turbo tax making us report on schedule C

[papax2]

My wife is a teacher in Georgia and the state sent the teachers $1,000 under the cares act for working during covid. She gets a W2 from her employer, but the $1,000 came from a different company, reported as a 1099-NEC.  Turbo tax makes us enter this on a schedule C, but my wife does not have her own business.  If we mark as should have been reported on our W2 it says it should have been reported by Cares Solutions, not her employer.  The schedule c makes us fill out everything for a business that doesn't exist, such as accounting methods, etc.  Any help how to teat this would be appreciated. Using Turbotax Deluxe on a mac 

[ColeenD3 · Accepted solution]

Unfortunately, there is no way to make this W-2 income. If it is reported on Form 1099-NEC, it is Self-employment income. The only way around it is to ask that it be changed by the issuer. Since this issuer is not her employer, this is unlikely to happen.

By default, if you are not issued a W-2 for the income you earned, you are self-employed.

[papax2]

Thank you!

[ccwy2k]

I am running into the exact same issue. Talking with other teachers, they were issued the $1,000 through their actual employer so they are not running into this issue. It sounds like the $$ should have come through the employer preventing this. I am going to talk to the school and see if they can address (I don't have high hopes) but if I have any success, I will post or send you a message directly.

[GeorgeDenseff]

If not Schedule C inccme, then report as other common income.

[LenaH]

No. If bonuses or incentive pay are reported on a 1099-NEC, then you will still need to pay the uncollected Social Security and Medicare tax, as well as the income tax. This could be why it is populating under your Schedule C and adding self-employment tax (which will end up being your portion of the Social Security and Medicare on this income). 

The IRS classifies bonuses as supplemental wages, along with severance pay, taxable fringe benefits, vacation pay, back pay, and overtime. Supplemental pay is anything other than your husband's regular pay.

Typically, incentive pay are added to a W-2. However, there are different withholding methods for supplemental wages that the employer can consider, which are discussed in IRS Publication 15.

Per the IRS, regardless of the method employers use to withhold income tax on supplemental wages, supplemental wages are subject to Social Security and Medicare taxes. 

@GeorgeDenseff

[GeorgeDenseff]

Chose the option should have been reported on a W-2.

[Will1624]

Did any one figure this out

[LenaH]

As stated above, if bonuses or incentive pay are reported on a 1099-NEC, then you will still need to pay the uncollected Social Security and Medicare tax, as well as the income tax. This could be why it is populating under your Schedule C and adding self-employment tax (which will end up being your portion of the Social Security and Medicare on this income). 

The IRS classifies bonuses as supplemental wages, along with severance pay, taxable fringe benefits, vacation pay, back pay, and overtime. Supplemental pay is anything other than your husband's regular pay.

Typically, incentive pay are added to a W-2. However, there are different withholding methods for supplemental wages that the employer can consider, which are discussed in IRS Publication 15.

Per the IRS, regardless of the method employers use to withhold income tax on supplemental wages, supplemental wages are subject to Social Security and Medicare taxes. 

@Will1624

[hgb0930]

How do you address the business questions in this scenario that turbo tax is requiring you to complete?

[LeonardS]

When you are entering your 1099-NEC from the teachers cares act when you get to the page Does one of these uncommon situations apply? check the button on the line This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common).  This will allow you to enter your 1099-NEC without needing to address any business questions.