Type of income for 1099-NEC, no categories match, what effects does it have?

[athlit]

I am a local government employee. I have a 1099-NEC from the state for "bonus" or "economic stimulus" money given to people in my profession by the state. When filing my 1099-NEC, it asks what type of income it is. It's not self-employment, and since it's from the state it's not income that should have been on my employer's W2. 

What do I choose? And how does the selection affect my refund?

[dev145]

Hello athlit,

Since I do not know who is the payer of 1099-NEC ( your employer or other entity), and need more info. about type of work before I can tell if this income should be subject to FICA taxes or not, here is general answer. Select the closest desc. that matches your line of work.  If nothing matches, you can always select "Other". Desc. do not have impact on your return. You will still have to pay FICA (SS and Medicare) taxes on it and TurboTax will calculate correct amount. 

If 1099-NEC is bonus from employer, it should have been reported on w2. You might be able to use form 8919 to report income. 

https://www.irs.gov/forms-pubs/about-form-8919#:~:text=Use%20Form%208919%20to%20figure,independent%2....

Thanks for contact  and hope this info. is helpful. 

[athlit]

Thanks. I work for a local county government. The check came from the state government. The 1099-NEC is from the state government. The payment we were given was part of a program issued by the governor to give workers a "bonus" check advertised as a thank you for our line of work.

There was not an "Other" option to select.

[dev145]

Since this was described/classified as bonus, it should have been reported on w2. You can either requested a correct w2 or you can report income using form 8919, code H. I would suggest first asking for corrected w2 if possible. 

[athlit]

But it wasn't from my employer, the County. It came directly from the state-- both the pay and the 1099 NEC.

[dev145]

Can you tell me which state?

[athlit]

Florida

[dev145]

Is the payment related to below. 

https://www.flgov.com/2023/09/18/governor-ron-desantis-awards-recognition-payments-for-floridas-firs...

If yes, I would say report it as other income. Do not report it as SE or business income. 

[rjs]

@athlit 

Here's how to report the Florida First Responder Recognition Payment as other income in TurboTax.

Type 1099-nec in the Search box, then click the link that says "Jump to 1099-nec." After you enter the information from the 1099-NEC, the next screen says "Describe the reason for this 1099-NEC." It doesn't matter what you enter. The description will not appear on your tax return. Enter a short description such as "First responder." Click Continue.

The next screen asks "Does one of these uncommon situations apply?" Select "This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby." Click Continue.

The income will be reported as other income on Schedule 1 line 8z.

You do have to pay tax on the bonus. It will be taxed as ordinary income, the same as if you had earned $1,000 more pay. The tax on the additional $1,000 of income will reduce your refund by the amount of additional tax.

[athlit]

Thank you @rjs, that explanation makes a lot of sense, and I'm glad you ciphered exactly what the income was from. 

I deleted the 1099-NEC and started over how you recommended. However, the first thing that comes up when I start a new NEC entry is the question: 

What type of income is on your 1099-NEC?

Self employment income

Farm income

Hobby

Lawsuit settlement

Medicaid waiver payments that qualify as difficulty of care

Income that should've been reported on a W-2

Those are the only choices, and that's the first question I have to answer. 

I've played with them a couple times, ending up in the SEP circle and the W2 circle, neither of which the follow up questions apply. How do I get past this and get to the questions you mentioned?

Thanks for the help.

JR

[rjs · Accepted solution]

I don't get that question, but I'm using the Premier desktop software. It looks like the flow of the questions is different in Deluxe. Try this instead. The result on the tax return is the same.

• Don't enter the 1099-NEC at all. If you have already entered it, delete it.
• In the Search box type "executor fees" (without the quotes), then click the link that says "Jump to executor fees." I know that's not what the payment was for, but it's the best search term I could find that gets you to the right place.
• The first screen asks, "Any Other Taxable Income?" Click Yes.
• On the next screen, "Other Taxable Income," enter a short description and the amount. For the description I suggest "Florida first responder payment on 1099-NEC." Click Continue.
• On the next screen click Done.
• You may get a couple more screens with unrelated questions, or questions you have answered before. If they don't apply to you, just answer No and click Continue.

The income will be reported on Schedule 1 line 8z with the description that you entered.

[athlit]

Worked, thank you. Taxed about 12% less than it should have, but the amount is minimal hopefully it doesn't become an issue. If it does it's not much to come up with to pay back. For someone who has a lot more, that might be more of an issue. 

Thanks for the help and patience. 

[TurboTax if you're listening-- be sure you have the "Other" category on the web version for all of us. This is an error on your part as far as I'm concerned.]