1099 NEC Sign on Bonus - How to File?
Hello!
I signed a contract in Fall 2023 and received a sign on bonus/stipend shortly thereafter in the 2023 fiscal year though my official start date is Summer 2024. I have not provided any services for this company and received a 1099-NEC form for tax filing. I discussed with the company and they stated it is their standard to provide 1099s instead of W2s. There have not been any withholdings for this stipend and I acknowledge there will be taxes regardless.
My question is whether this should be filed as 'self-employed' income or whether I would need to file an SS-8 form with the IRS?
Thanks in advance
Best Answer
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Hello Bquach,
You can report the 1099-NEC just as you received it. Report it on the Schedule C as "self-employment" income. Keep in mind, you can report any expenses related to that income. For example, you may have some Vehicle and Travel expenses. With a start date this summer, you are technically not their employee, so a 1099 could be appropriate.
An SS-8 is used when you want to ask the IRS to determine if a worker is an employee or an independent contractor. Basically, telling the IRS and your new employer things were done incorrectly.
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Answers
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As a follow-up regarding signing bonuses, in most cases, a signing bonus should be reported on a W-2, as it is generally considered wages tied to employment.
There are rare circumstances where a payment is not directly tied to an employment relationship, in which case a 1099-MISC could be appropriate.
A 1099-NEC is typically used for independent contractor/self-employment income, which would generally not be the correct form for a signing bonus.
If your employer has issued a 1099-NEC for your signing bonus, I recommend contacting your employer to request a correction. If they are unwilling or unable to correct it, you have a couple of options:
- Report it as described above using the Schedule C method
- File an SS-8 as mentioned previously to have the IRS determine your worker classification
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