Schedule C - 1099 NEC

[PLC3]

My husband received commissions earned from his former employer after he left the company.  The company issued him a 1099-NEC for the commissions earned since he was no longer an employee at the time the commissions were paid out.

How should I record the income received?  Just want to make sure I record this correctly since it was a one time payment of commissions and not from a business operated by my husband if that makes sense.  Or should this income even be on Schedule C?   I noted it as Sales on Schedule C but not sure if that was right and if so does this income received qualify as "Qualfied Business Income"? 

Thanks in advance for your help!

[Vanessa A]

You can contact the employer and have them fix this.  An employer cannot issue a 1099-NEC to an employee even for commissions. Issuing the 1099-NEC keeps them from paying their share of the FICA taxes.  It also stops them from withholding his FICA taxes which means he will need to pay them. 

You will need to enter your income by selecting the following:

1. Income
2. Show More next to Less Common Income
3. Start next to Misc Income
4. Start next Other income not already reported on a form W-2 or Form 1099
5. Yes to did you receive any other wages
6. Continue through to did you earn any other wages and answer yes
7. Select employee compensation that was not reported on a W-2
8. Hit continue
9. Report your wages and select I received a 1099 for this income use reason code H

Myths About Misclassification

[PLC3]

Just to clarify - my husband was no longer an employee when he received the commission pay out.    So should we contact the former employer to have the W-2 reissued and what if they do not respond or refuse to issue a new W-2 before the tax deadline (since we are only 5 days away from 4/15/25)?  Do I got ahead and file my taxes and report the income as you suggest in your initial response?  Or do I need to file for an extension until I hear from the former employer.  

Thanks for the additional assistance.

[Vanessa A]

If he was an employee when he earned the commission, then this should be reported on a W-2.  

Yes, if they will not change it quickly then you should file the way I suggested in my initial response. You can file an extension, however, that is assuming they will change it.  They may not be willing to, and if not, it is easier to let the IRS handle it.  

[PLC3]

Just following up with one last question that I have not had a response yet on!

Thanks for the helpful information - one more question to clarify or to see if it would change anything in regards to reporting.

My husband was employed at the time he made the sale of the project.  The company’s policy was to not pay out commissions until the project was completed usually (6-8 months or more) from when the initial sale was made.  Thus by the time the project was completed my husband was no longer an employee of the company but they still honored the commission owed and thus issued him the 1099-NEC.   Should the commission still have been on his W-2 or?

Thanks for all of your help so far!!

[RobertB4444]

At the time the commission was paid your husband was no longer an employee.  So they were under no obligation to take out taxes or anything like that.  So what they did was perfectly reasonable.

@PLC3