State incentive,1099 NEC

[sanichols]

My state gave out an incentive (similar to a stimulus check) to childcare workers and teachers, I received one. For taxes, they sent a 1099 NEC but as I am going through my taxes, Turbo thinks I have a business and wants me to input business information. I feel like this should have been a 1099 MISC? If not, then how to do I file this since I am not self employed and don't have a business?

[PattiF]

From LenaH:

If bonuses or incentive pay are reported on a 1099-NEC, then you will still need to pay the uncollected Social Security and Medicare tax, as well as the income tax. This could be why it is populating under your Schedule C and adding self-employment tax (which will end up being your portion of the Social Security and Medicare on this income). 

The IRS classifies bonuses as supplemental wages, along with severance pay, taxable fringe benefits, vacation pay, back pay, and overtime. Supplemental pay is anything other than your husband's regular pay.

Typically, incentive pay are added to a W-2. However, there are different withholding methods for supplemental wages that the employer can consider, which are discussed in IRS Publication 15.

Per the IRS, regardless of the method employers use to withhold income tax on supplemental wages, supplemental wages are subject to Social Security and Medicare taxes. 

[Edited 02/05/22 | 12:36PM PST]

@sanichols 

[sanichols]

OK, thank you! I totally understand I need to pay taxes on it, just not sure what to do after I input the information from my 1099 NEC into TT and Turbo Tax wants me to then enter my new business name and give them all of that information, which I do not have since I don't have one. It doesn't seem to recognize that I have no new business information and thinks I missed entering stuff since it is blank. @PattiF 

[PattiF]

There are many questions that TurboTax asks with a 1099-NEC. If you click on It's something else as shown below, you won't be asked about a business name, and will be able to answer all the questions needed to complete this section. If needed, delete the information and start over using this selection first.

[mnswafford]

My daughter received this form for money sent as a stilimus for working in childcare. After entering all information, Turbo Tax is asking for business information. We don't have that information beacuse it wasn't business income. How do I get passed this information so that it show errors in the final check.  I am using the downloaded version of Turbo Tax. Thanks.

[LenaH]

If you want to enter your 1099-NEC and have it flow to Other Income (and not be classified as self-employed), please follow the instructions below:  

1. Open your return.
2. Search for 1099-NEC with the magnifying glass tool at the top of the page.
3. Click on the Jump to 1099-NEC link at the top of the search results. 
4. Click Edit next to your 1099-NEC.
5. Enter past the information as shown on your form. 
6. On the page Does one of these uncommon situations apply?, choose This is not money earned as an employee or self-employed individual, it is from a sporadic acitivity or hobby (this is not common).
7. Search schedule c with the magnifying glass
8. Use the trash can icon to delete any business populated
9. Your 1099-NEC will flow your income to Other Income (Line 8z of Schedule 1). 
10. Click on Tax Tools on the left hand side.
11. Click on Tools.
12. Click on View Tax Summary.
13. Click on Preview my 1040 on the left hand side.
14. Search for Schedule 1 - Additional Income & Adjustments to Income.
15. A description of your Other Income and the amount should be listed in Line 8z. 

@mnswafford

[mnswafford]

That worked! Thanks!