Lump sum payout from job offer being rescinded counted twice in turbotax online tax calculation

[taxquestioner3]

I am using turbotax online. I received a 1099 NEC form when a job offer got rescinded and I received a lump-sum payout. I also have normal income from a job I started later that year. When I input the 1099-NEC form, it gets added to the total income, so if I had 20k from my job and 20k from the payout my total taxable income is 40k and it calculates about 2k in taxes based off of that.

However, it also adds the payout to the "other taxes" section and gives an additional $3k in self-employment tax, bringing the total taxes owed to $5k. I paid taxes on my normal job so the total taxes owed is around 3500 (3k self employment + 2k total taxable - 1.5k paid).

How does that make sense? Isn't it taxing that 20k payout twice? I am paying taxes on the 40k total income which already includes the 20k right?

[MindyB]

It's not being taxed twice.  What is happening is, you are paying self-employment tax (FICA: Medicare and Social Security tax) because you were issued a 1099 and not a W-2.  When you have a typical W-2 job, the employer will take care of the withholding, as well as pay for 1/2 of the payroll tax.

Bonuses are wages that are subject to federal income tax, state income tax, and FICA taxes.  Although you're not technically self-employed, the self-employment entry in TurboTax allows you to enter the income, and then calculates all the appropriate tax on this income.