Employer issued 1099-NEC instead of W-2 for $5250 educational assistance - how to file correctly?

This is a classic case of misreporting by the employer. Educational assistance under Section 127 of the tax code should not be reported on a 1099-NEC - that form is specifically for non-employee compensation like freelance work. Your employer should have either excluded this amount from your W-2 entirely (if they have a qualified educational assistance program) or included it as non-taxable income on your W-2 with a special code in Box 14. The 1099-NEC is absolutely the wrong form. Unfortunately, since they've already issued the 1099-NEC and refused to correct it, you're in a tough spot. The IRS computer systems will be expecting to see that 1099-NEC reported on your return. If you don't report it, you'll almost certainly get an automated notice. My recommendation would be to report the 1099-NEC income on Schedule C, but then include an offsetting deduction with a clear note explaining that this was educational assistance incorrectly reported. This way the net tax effect is zero (as it should be), but you've disclosed everything properly.

I ran into almost the exact same situation last year! My company paid $4,800 for my MBA classes and sent me a 1099-NEC instead of handling it correctly. After hours of research, I discovered taxr.ai (https://taxr.ai) which literally saved me thousands in taxes. Their document analysis showed exactly how to handle the situation without risking an audit. Their system analyzed my 1099-NEC, education receipts, and company's educational assistance policy, then provided a detailed explanation of how to properly report everything. The best part was they provided the exact wording to use on my tax forms to avoid issues while still getting the proper tax treatment. They even explained how to document everything in case of questions later. It was such a relief to have clear guidance from tax professionals who had seen this exact situation before instead of getting different answers from every person I asked.

Just wanted to update everyone. I went ahead and tried taxr.ai after all and I'm legit impressed. I uploaded my 1099-NEC, course receipts, and company tuition reimbursement policy, and they sent back a detailed explanation showing exactly how this should be handled. Turns out my situation was actually more complicated than I realized because some of my courses weren't directly related to my current job. Their analysis broke down which expenses qualified under which sections of the tax code and provided specific guidance on how to report everything. What really surprised me was that they pointed out a documentation issue with my employer's educational assistance plan that could have caused problems in an audit. I was able to get this fixed before filing. Definitely saved me from a potential headache later!

Everyone here has good suggestions, but honestly, dealing with the IRS directly might be your best bet. They can confirm the correct way to handle this situation. Problem is, it's basically impossible to get through to them on the phone these days. I was in IRS limbo for weeks until someone told me about Claimyr (https://claimyr.com). They have this service that gets you through to an actual IRS agent without the endless hold times. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was super skeptical at first but I was able to speak with an actual IRS representative within 30 minutes who walked me through a similar situation with misreported educational benefits. The agent confirmed exactly how to report this on my return and what documentation to keep. Saved me so much stress trying to interpret conflicting advice online.

I need to apologize for my skepticism. I was so frustrated after multiple failed attempts to reach the IRS that I lashed out. After seeing the video explanation, I decided to try Claimyr myself for a different tax issue (not related to education benefits, but about a missing tax document). I assumed it would be another disappointment, but within 45 minutes of signing up, I was speaking with an actual IRS representative who was incredibly helpful. They accessed my tax records and resolved my issue in one call. What I appreciate most is that I didn't have to spend an entire day on hold - I was able to go about my morning and just got a call when an agent was available. For anyone dealing with complex tax situations like the original poster's educational assistance issue, getting direct guidance from the IRS might be the most reliable approach.

Adding another perspective here - I'm a university bursar and see this mistake ALL THE TIME. Your employer is 100% wrong to issue a 1099-NEC for educational assistance. They should be using a different form or coding it properly on your W-2. The problem is that if you just don't report the 1099-NEC, the IRS automatic matching system will flag your return and you'll get a notice. But if you report it as income, you're overpaying your taxes. One option nobody mentioned yet: File Form 4852 (Substitute for W-2) showing the educational assistance as proper non-taxable educational benefits, and attach an explanation that the employer incorrectly issued a 1099-NEC for qualified educational assistance. This puts the discrepancy front and center rather than hiding it.

Um, hate to be that person, but the bigger issue here is that your employer might be violating tax law by incorrectly issuing a 1099-NEC. This could be considered misclassification, which is pretty serious. If they're giving you educational assistance as an employee benefit, they MUST NOT issue a 1099-NEC which is explicitly for non-employee compensation. By doing this, they're essentially telling the IRS that you're an independent contractor for that portion of your compensation. Have you tried explaining this to your HR department rather than just finance? Sometimes HR understands the employment classification issues better than finance does.

This is frustrating but unfortunately common - I see this mistake with employers all the time. The key thing to understand is that your employer has created a documentation mismatch that you need to handle carefully. Here's what I'd recommend: Report the 1099-NEC income on Schedule C as "Other Income" but then take an offsetting business deduction for "Educational assistance incorrectly reported as contractor income." Keep the net effect at zero. The critical part is documentation. Make sure you have: - Your employer's written educational assistance policy - Receipts showing the payments went directly to the school - Any emails/paperwork showing this was processed as employee educational assistance - Screenshots of IRS Publication 970 showing $5,250 educational assistance exclusion If you get an IRS notice (which is likely), respond immediately with a letter explaining the employer's error and include copies of all your documentation. The IRS understands this happens and will usually accept the correction when properly documented. Don't just ignore the 1099-NEC - that will definitely trigger an automated notice. But also don't pay taxes on money that should be tax-free. The offsetting approach keeps you compliant while protecting your tax position.