Question

Received a 1099-NEC and W2 for same work as a "leased employee"

Forum|Forum|3 years ago
February 9, 2023
2 replies
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I work remotely for an out-of-state company. When I was hired by this company I was onboarded to a third party that handles the payment processing and W2's. They told me they do this for their out-of-state employees and that I'm technically considered a "leased employee". But it's full-time and I have no other relationship with this third-party.

That all seems fine - I received a W2 from the middle-man. But I also received a 1099-NEC from the actual company I work for for a yearly bonus. I assume they paid this to me directly and not processed through the employee leasing company.

When I go to enter the 1099-NEC in TurboTax it seems to want to consider it self-employment income. I'm wondering the correct way to enter this 1099-NEC considering it's a bonus for the work I'm getting paid W2 for - where is the correct place to enter it?

B

Bsch4477

Employee

Someone has to pay social security and Medicare tax on that income which would normally be paid through your W-2. Since you were issued a 1099-NEC the IRS will be looking for a Sch C to report the income as self employment income where you will owe the self employment tax.

C

Cynthiad66

Incentive payments aren't considered regular income, so they're subject to different rules. They're reported in Box 3 on the 1099-MISC form as "other income," not on Form W-2 with other wages and payments from which taxes are withheld.

Report it as Other Income.

Follow these steps to enter the bonus. The first few steps might vary a bit in TurboTax Online, depending on what you have already done.

On the left side click Federal.
Click Wages & Income.
Click "I'll choose what I work on" or "Jump to a full list."
On the screen "Your 2021 Income Summary," scroll all the way down to the last section "Less Common Income." Click the Start button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
On the next screen click the Start button for "Other income not already reported on a Form W-2 or Form 1099."
The next screen asks "Did you receive any other wages?" Select Yes and click Continue.
The next two screens ask about household employee wages and sick or disability pay. Click Continue on these two screens without entering anything.
The next screen asks "Did you earn any other wages?" Select Yes and click Continue.
The next screen asks the source of the other earned income. Select "Employee compensation that was not reported on a W-2." Click Continue. Ignore the note that says not to enter payments for which you will receive a 1099.
On the next screen, "Employee Compensation Not Reported on a W-2," click Continue.
If you are filing a joint return, you will get a screen asking which one of you the income is for. Select your name and click Continue.
On the next screen, "Report Your Wage Income," enter the employer's name and EIN from your W-2. For Total Wages Received, enter the amount of the bonus. For the Reason Code select "H - I received a Form W-2 and a separate Form 1099-MISC and/or 1099-NEC and the income should have been reported on Form W-2." Click Continue.
Read the next screen, "Report as Wages," and click Done.

How Bonuses are Taxed

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M

mjd4Author

Thanks for the detail! Is this true even though the EIN on the W2 is from the "employee leasing company" and the EIN on the 1099-NEC is the actual company that I'm doing the work for?