1099-NEC

[Melissa90]

I received a 1099-NEC for a year end bonus.  I am entering the information in Turbo Tax but am not sure which box to check.  I am not self-employed is it considered the sporadic option or is it none of the above.  I want to file correctly and not have to face the IRS later.

[rjs]

Was the bonus from an employer that also gave you a W-2?

[Melissa90]

No

[rjs]

Is the "year-end bonus" a "Recognition Payment" from the state of Florida? If so, click this link for instructions to enter the 1099-NEC in TurboTax, and you do not have to read the rest of this reply.

If it's not a Florida Recognition Payment, who is the bonus from, and why did they pay you a bonus? How much was the bonus? You have to provide more detail about the nature of the bonus that you received.

A "year-end bonus" usually means an extra payment from someone who paid you for services during the year. If it came from someone who paid you for work you did during the year, but who is not your employer, did they give you a 1099-NEC or any other tax form for the other money that they paid you during the year, besides the bonus? If you earned money for work that you did for someone who is not an employer (that gives you a W-2), then you are indeed self-employed and the bonus is additional self-employment income.

One possible exception is a household employer who paid you less than $2,600 for the year (for 2023), including the bonus. A household employer means you worked in their home. If you worked in someone's home and the total amount they paid you for the year is less than $2,600, you are their employee but they are not required to give you a W-2. If you were a household employee the employer should not have issued a 1099-NEC. There is a way to report it correctly on your tax return in spite of the household employer's error, but it's a bit more complicated. If this is your situation, I will give you detailed instructions for how to handle it.

When you provide the details of who the bonus is from, why you got it, and how much it is, I should be able to give you instructions for your specific situation.

[Melissa90]

It is a 1099-NEC from the management company strictly as a year end bonus.

[rjs]

You are being too evasive, and withholding too much information, for anyone to be able to help you with your tax filing question. If the bonus is related to a situation that you don't want to discuss in an open forum (even though you're anonymous), then you should consult a local tax professional for help.

If you want an answer to your question about the correct way to enter your 1099-NEC in TurboTax, you have to provide a lot more information so that we can understand your tax situation. A one-word or one-sentence answer is not enough. We don't care what kind of activity you are engaged in, and we don't make judgements. We just help people prepare their tax returns with TurboTax.

What is the management company? What do they manage? What is your relationship to the management company? Do you do some kind of work for them, or provide services to them, or sell something to them? Or do you have some other kind of business relationship with the management company? Do you represent or promote the management company in some way, or engage in some sort of joint activity with them? Does the management company provide some product or service that helps you make money? And of particular importance, did the management company make any other payments to you in 2023 besides the year-end bonus? If so, did they report those payments on any kind of tax form, such as a W-2 or a 1099-MISC?

[Melissa90]

Not trying to be evasive but I have said all I know.  I work for one company and received a W-2 from them.  At the end of last year I received a bonus from the management company.  Not sure how the two are related or why the bonus would have come from them.   The management company may oversee all of the businesses or what the owner & corporate gets paid from - other than that I'm not sure.  I am not aware of work I do for them nor am I a household employee.  As far as I am aware it is a one time payment a year.  I hope that gives a direction.

[Hal_Al]

 It appears that the "management company" is the parent company of  the "one company you worked for and received a W-2 from". 

The "proper way" is usually for the employer to add a bonus to your W-2.  There appears to be some legality about the organizational structure that the "management company" is not your employer.

This can be simplified. 

Although it may be news to you that you “have a business” (and most of the other people who get their first 1099-NEC); The IRS considers anything on a form 1099-NEC to be self employment income. Enter the 1099 income, at 1099-MISC and Other Common income / income from a 1099-NEC . TurboTax (TT) will complete Schedule C  for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security & Medicare) on any profits greater than $432. These types of payments are sometimes done this way. Your "employer" is not the only one.

[rjs]

Just a minor correction to what Hal_Al said: If your net self-employment income is more than $432, then you pay self-employment tax on the full amount, not just the amount over $432. TurboTax will calculate the self-employment tax automatically.

It's unlikely that you have any expenses associated with the bonus, so your net self-employment income will be the full amount of the bonus, as shown on the 1099-NEC. If the bonus was more than $432 you will have to pay self-employment tax.

Self-employment income is included in your total income and you pay regular income tax on the self-employment income. Self-employment tax is in addition to the regular income tax, to make up for the fact that Social Security and Medicare taxes were not withheld from the self-employment income, like they are from your W-2 income.