No, your husband's employer did not report the bonus on the correct form. All payments from an employer to an employee are supposed be treated as wages and be included in the employee's W-2. It doesn't matter whether it's regular pay, a bonus, or some other special payment. Form 1099-NEC is for "nonemployee compensation." But your husband is an employee, not a nonemployee. All of his compensation from his employer is employee compensation and should be included in his W-2. However, there is a way to report the 1099-NEC correctly on your tax return, in spite of the employer's error.
After you enter the 1099-NEC in TurboTax you will come to a screen that asks "Does one of these uncommon situations apply?" Select "My employer reported this extra money on a 1099-NEC but it should have been reported on a W-2." Then click Continue. On the next screen select "I received Form W-2 and this Form 1099-NEC, but all the income reported on this Form 1099-NEC should have been included on my Form W-2." Then just read the next couple of screens and click Continue.
TurboTax will include Form 8919 in your tax return. The bonus will be reported as wages on Form 1040 line 1g. Form 8919 calculates the Social Security and Medicare taxes that your husband's employer should have withheld on the bonus. The total of these taxes will appear on Schedule 2 line 6 and will be included in your total tax liability. It will not be reported as a business, and you will not have to pay self-employment tax.
