1099 - NEC

Forum|Forum|3 years ago
January 25, 2023
1 reply
13 views

I've entered my information both with the 1099NEC form or as W-2 (at some point, there is a question asking if the income should be entered as W-2)

I notice my refund calculated is much larger when switching to W-2 (more than double)

I am wondering if I am making some error in inputting it as 1099 income, and want to confirm that 1099 NEC should in fact be entered as Self-Employment income?

Assuming so, is there a reason that if entered as W-2 income, the estimated return is over $3000 more than I entered under Self-Employment? Should entering income as the latter disqualify one from receiving the EITC?

Additionally, when it begins asking me about whether I actually should have received a W-2, I am unclear about the information they use to determine which it should actually be. Can this be clarified?

It seems that if there is a gray area or people are being paid / treated as private contractors when they may more so be considered employees, then arguing this point may not be in a payee's best interest

Thank you for any insight

Ask the Experts - Tax Law Changes - Jan 2023

JamesG1

Level 15

W-2 wage income is subject to income tax computed on IRS Form 1040.

The IRS presumes that 1099-NEC income is self-employment income that is subject to:

Self-employment income computed on Schedule SE, as well as
Income tax computed on IRS Form 1040.

Income on 1099-NEC not reported to the IRS will likely prompt an inquiry from the IRS.

IRS 2022 Instructions for Forms 1099-MISC and 1099-NEC page 7 states:

Specific Instructions for Form 1099-NEC

File Form 1099-NEC, Nonemployee Compensation, for each person in the course of your business to whom you have paid the following during the year. At least $600 in:

Services performed by someone who is not your employee (including parts and materials) (box 1); or
Payments to an attorney (box 1).

Both self-employment income and wages should meet the income requirement for the Earned Income Tax Credit.

If you are concerned about being treated as a private contractor versus an employee, you may want to explore IRS form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

See also here and post about this process if you have further questions.

[Edited 1/25/2023 | 4:05 pm PST]

@Rachel32

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