W2 and 1099-nec received for the same work. How do I process in TurboTax?

[timmichelle]

I received both a W-2 and a 1099-nec for the same work/employer.  I entered both into TurboTax and now it won't let me process electronically because of the less than $1 amount in box 1 on the W2. 

When I asked the employer why they issued both, they said:

"The FEDERAL you are a contractor and wages were reported as such on the 1099 w/no federal taxes w/held to the IRS

The STATE W2 was sent for the filing of your STATE income – and reported to the state of California ONLY

If you have further questions – please contact your tax professional – this is all due to your state legislatures wanting their state taxes and declaring you as an employee, instead of a contractor for STATE taxation purposes."

So my main question is:

Does this mean that I shouldn't enter the W2 for federal, only for state input? (By the way, the state is CA), if not, how should I be processing this situation in TurboTax?

Here is what was on the W2/1099nec

W2 boxes

box1:   $0.01

box14: CASDI $11.16

box16: $928.21

box17: $0.00

1099-nec boxes

box1: $928.21

no other boxes

[LeonardS]

You can not be a W-2 employee and a contract worker, doing the same work, for the same employer.  If you are considered as a contractor for federal purposes you are also considered a contractor by California.  The following statement is from the California Employment Development Department (EDD)

"...You are required to report independent contractor information if you hire an independent contractor and the following statements all apply:

• You are required to file a Nonemployee Compensation Form (1099-NEC) or a Miscellaneous Information Form (1099-MISC) for the services performed by the independent contractor.
• You pay the independent contractor $600 or more or enter into a contract for $600 or more.
• The independent contractor is an individual or sole proprietorship."  

Ref: EDD Independent Contractor Reporting

You may want to contact the "employer" and ask for clarification:  Are you an employee or contractor?  You need this determination to properly file your tax return.

[timmichelle]

My employer stated that I am a contractor and that the W2 was issued for state filing purposes.  T

This is the exact message they sent me:

"The FEDERAL you are a contractor and wages were reported as such on the 1099 w/no federal taxes w/held to the IRS

The STATE W2 was sent for the filing of your STATE income – and reported to the state of California ONLY"

[FangxiaL]

Delete the W-2 form from your federal return. Report the 1099-NEC as self-employment income.

@timmichelle

[timmichelle]

Thank you for your answer. 

When you say "Report the 1099-NEC as self-employment income", do I do this simply by reporting the 1099-NEC?  I guess "as self-employment income" kind of confused me.

[john-ct]

The way I read your employer's answer: The 1099 was for your Federal return, and the W-2 was for State of CA only.

Just enter the 1099 on Fed or you may be taxed twice on the same income.  Also, you can dedust your expenses from 1099 income, but not for wages.

If you must use the W-2, or if the problen exists on the state return as well, enter $1 for box one to get around this possible  program glitch.  It's not going to effect your taxes.  

[DianeW777 · Accepted solution]

Yes.  This is considered income from work as an independent contractor and for this reason you must complete a Schedule C.  You can enter the Form 1099-NEC itself or you can simply complete Schedule C and enter the amount directly as self employment income by selecting 'Other self-employed income, includes 1099-K and cash...' .  There is no reason to enter a W-2, if you have you should delete it.

You will be allowed to use any expenses that were ordinary and necessary for you to earn this money since you are self employed.

Follow the steps here to enter your income using the Form 1099-NEC:

1. Search for 1099-NEC and click the Jump to... link to begin your entry.

Follow the steps here to enter your income without using the Form 1099-NEC:

1. Open your TurboTax return > Search (upper right) > Type schedule c > Press enter > Click the Jump to link.
2. Select to Edit beside your business > Select Income > Select Other self-employed income, includes 1099-K and cash...

The business name is your name and the business address is your address if you do not have a separate business location.

The business code should reflect the type of work you do, and if you're not sure you can always use 999999.

Information provided by our awesome Tax Expert @RayW7 provides an excellent resource about this topic here.

[MaxwellSmart]

Of course not if you're doing the same work.    But an employee CAN be issued a W-2 AND a 1099-NEC when either doing work on the side for the same company like a side project OR in the case of a Life Insurance Salesman, he would get a W-2 for his wages as an employee but also a 1099-NEC for wages he received from his clients who he serviced.   He works a 9-5 job for the company, but also acts as an independent worker selling his company's life insurance on the side. 

The State AND the Federal government expect their fair shair on both incomes.   I want to enter my W-2 income and take the standardized deduction and enter the 1099-NEC and itemize my deduction.  

The is precisely what Turbo Tax Home and Business is for.