State incentive,1099 NEC

Forum|Forum|4 years ago
February 5, 2022
6 replies
31 views

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

Level 15

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

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sanicholsAuthor

Level 2

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

Level 15

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.