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
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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:
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:
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]
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