Received 1099-NEC for company sale bonus. Turbo Tax wants me to file Schedule C as business income - is this right?

Wait, so doesn't that mean OP is paying MORE in taxes than if the company had just included it in their regular paycheck? Isn't there a way to contest this with the company that issued the 1099 instead of accepting the higher tax burden?

Yes, unfortunately receiving payment via 1099-NEC instead of on a W-2 typically results in higher taxes because you become responsible for both the employer and employee portions of Social Security and Medicare taxes, which is that 15.3% self-employment tax I mentioned. You could certainly try contacting your former employer to explain the situation and ask if they would correct the form. Sometimes companies will issue a corrected W-2 that includes the bonus amount and void the 1099-NEC. However, be aware that many companies specifically structure acquisition bonuses this way intentionally, so they may be unwilling to change it.

How exactly does this work? Do you have to send all your private tax documents to some random website? That sounds kinda sketchy tbh.

Can it help if I already filed incorrectly? I got a 1099-NEC for consulting work last year but I just added it as "other income" instead of Schedule C because I didn't know any better. Now I'm worried I'll get audited.

The system uses secure encryption for all documents, similar to what tax professionals use. You can also block out any super sensitive info before uploading if you're concerned. It's not some random site - it's specifically designed for tax document analysis by tax pros. Yes, it can definitely help with previously filed returns. For your situation, it would analyze your filing and tell you if you need to file an amended return with Schedule C. The system can actually generate the forms you'd need to correct the mistake, which is way easier than trying to figure it out yourself.

Does this actually work? I've literally tried calling the IRS like 20 times this month and can never get through. Always get the "due to high call volume" message and then it hangs up on me.

Sounds like a scam honestly. Why would I pay some third party when I can just keep calling the IRS myself for free? Eventually you'll get through if you keep trying different times of day.

Yes, it really does work! The service basically navigates the IRS phone tree for you and waits on hold in your place. When they reach a live agent, they call you and connect you directly. I was skeptical too until I tried it - got connected in 17 minutes when I had been trying for days on my own. It's definitely not a scam - you're not giving them any personal tax info. They're just getting you past the hold queue. And honestly, after spending hours redialing only to get disconnected, the time saved was totally worth it. The IRS agent I spoke with gave me exactly the guidance I needed for my specific situation.

Thanks for this perspective! I hadn't thought about possible deductions. During the acquisition, I did use my personal laptop exclusively for a lot of the transition work and even bought an external hard drive ($120) specifically to transfer company files securely. Would those count as deductions I could take?

Yes, the external hard drive would definitely count as a deductible business expense since it was purchased specifically for this work. You can likely deduct a portion of your laptop cost too, but it would need to be based on the percentage of business vs. personal use. Other potential deductions might include any software you purchased, internet costs during the period you were doing this work, even a portion of your cell phone bill if you used it for business calls related to the acquisition. Keep all receipts and document the business purpose of each expense, just in case you're ever questioned about them.

This is the best advice here! Companies make mistakes all the time with these forms. If you were an employee when you earned this bonus, they should be reporting it on a W-2, not a 1099-NEC. Self-employment tax is no joke - it's an extra 15.3% you shouldn't have to pay if you were an employee!

It's $8,750. So yeah, not a small amount. The self-employment tax would be around $1,300 extra from what I calculated, which feels really unfair since this was literally just a bonus for being a good employee during the transition, not me running a business or doing freelance work.

At $8,750, you're looking at approximately $1,340 in self-employment tax you wouldn't have paid if it had been properly included on a W-2. That's definitely worth addressing. Since the company won't correct the form, you have two main options: (1) File it on Schedule C as they reported it, but maximize any legitimate business deductions to reduce the taxable amount, or (2) Report it as "other income" which avoids self-employment tax but could trigger a mismatch notice from the IRS since it doesn't match how the company reported it. Option 1 is safest but most expensive, while option 2 saves money but carries some audit risk.