I received a W-2 for employee wages, but got a 1099-NEC for my Christmas bonus. I think I need to file an 8919, but do I still include the 1099-NEC for business income? Also, on the 8919, it says to fill out the "Firm and Payment Entry Smart Worksheet" only if I did NOT get an 1099-NEC. Not sure what to do.
No, this is not business income. The employer made a mistake by not including this income on your W-2.
Enter the Form 1099-NEC under Income from Form 1099-NEC, not under Business Items. Do not link it to a self-employment business. TurboTax will pick this Form 1099-NEC up to report on Form 8919 when on the Does one of these uncommon situations apply page you select "My employer reported this extra money on a 1099-NEC but it should have been reported on a W-2." Do not enter it enter it on the directly on the Firm and Payment Entry Smart Worksheet. You should be doing all of this in step-by-step mode, not in forms mode.
The IRS (or maybe the Social Security Administration) will go after the employer for the employer portion of Social Security and Medicare taxes that the employer failed to pay.
The easier thing to do would be to contact your employer and ask them to issue you a corrected W2 that includes the bonus as they should have withheld FICA taxes from the bonus.
In the meantime, if they won't change it, you can enter it as the 1099-NEC which will cause you to pay self-employment taxes so you will pay double the social security and Medicare taxes you should pay on it or you can enter it as other income. If you enter as other income, you will under pay your share of social security and Medicare.
Edited 4/4/2022 @ 4AM PST @TCPITTS
Everything of value provided to you while an employee is considered wages and should be reported on your W-2. You should ask the employer to issue a corrected W-2 and cancel the 1099. If they won't do this, you will include the 1099 income on form 8919 with code H. You do not report self-employment income and do not file a schedule C or schedule SE.
I was going to suggest getting the employer to make the corrections, but I realized that it's not really easier for the employee or the employer to do so. The affected employees would have to repay to the employer the portion that should have been withheld for Social Security and Medicare taxes (or, for those who are still employed there, have the money taken out of wages yet to be paid), then the employer would have to issue everyone corrected Forms 1099-NEC showing $0, issue corrected W-2s, and file corrected W-3s. Seems far easier to just file Form 8919 and let the employer deal with the consequences.
@dmertz wrote:
I was going to suggest getting the employer to make the corrections, but I realized that it's not really easier for the employee or the employer to do so. The affected employees would have to repay to the employer the portion that should have been withheld for Social Security and Medicare taxes (or, for those who are still employed there, have the money taken out of wages yet to be paid), then the employer would have to issue everyone corrected Forms 1099-NEC showing $0, issue corrected W-2s, and file corrected W-3s. Seems far easier to just file Form 8919 and let the employer deal with the consequences.
Valid point, although the employee will end up paying the same 7.65%; if they don't pay it to the employer so the employer can correct the W-2 and 914, they will pay it on their tax return.