@sennyotai wrote:
My wife works at a daycare facility and gets a W-2 from them. The 1099-NEC is from 'Public Partnerships LLC' and not the state directly (if that matters).
This is a bit complicated. I would say here that even though your spouse is a childcare worker, she does not work for the state, so the bonus was not compensation for work performed for the state. I'm looking at this as being similar to a "SPIFF". This is a bonus paid to salespeople in certain industries like auto or appliance sales, where the manufacturer sends the salesperson a direct bonus in addition to their wages or commission from their regular employer. Since the salesperson is not directly employed by the manufacturer, the SPIFF is not compensation for work performed for the manufacturer. So it gets taxed as taxable miscellaneous income rather than taxable wages or taxable self-employment income. But that's just my opinion.
To report this as miscellaneous income (taxable but not self-employment) you would need to carefully look at the 1099-NEC interview for the test questions and answer them all no (this was not for work she performed, this was not like her regular job, this was not for profit, this is occasional income and not a regular thing). Those answers are true, because while childcare is her work, it was not work for the state that paid the bonus.
That should get you past the interview so you can report it as miscellaneous income rather than self-employment income.
