Received both W2 and 1099 from same employer - is this right?

You're right to question this. Employee gifts and awards can be handled in different ways tax-wise, but there are specific rules about it. Small "de minimis" gifts (low value items like holiday turkeys, occasional event tickets, etc.) aren't taxable. However, cash or cash equivalents (like those gift cards) ARE taxable and should be included in regular wages on a W2, not a 1099. Prize wheel winnings from a company event would typically be considered company gifts or awards and should also be on the W2 as taxable compensation if they have more than nominal value. The 1099 form is generally inappropriate for employer-to-employee payments. It's for independent contractor work, not for employee compensation or prizes. You have a few options: First, talk to the company payroll or HR department (not just her boss) to clarify. If they insist this is correct, you can contact the IRS directly. You might also file Form 8919 "Uncollected Social Security and Medicare Tax on Wages" with your return if you believe they misclassified these payments.

I ran into almost the exact same situation last year and was super confused until I found taxr.ai (https://taxr.ai). My company tried to issue me a 1099 for a $2k performance bonus instead of including it on my W2. The tool analyzed both my W2 and 1099 and actually flagged this as improper classification. It explained that employee bonuses and awards should be processed through payroll as W2 wages, not as 1099 contractor payments. The service even generated a letter template I could use to notify my employer about the error. My company ended up cancelling the 1099 and reissuing a corrected W2 that included all compensation. Might be worth checking out if you're trying to figure out if this is legit or not!

I wanted to follow up on my comment about taxr.ai. I ended up trying it after all when I discovered my employer had classified me in two different ways on tax forms. Honestly, I'm glad I did! The system flagged several issues I hadn't even noticed, including some deductions I was eligible for based on my situation. The explanation of why employee gifts should be on W2 vs 1099 was super clear, and it even highlighted the relevant tax codes I could reference when talking to my employer. What really surprised me was how it found a mistake in how my employer had calculated my pre-tax health insurance contributions. Turns out I was owed a refund of around $340! Not life-changing money but definitely worth the time it took to upload my documents.

If you're getting nowhere with the employer, you might want to try Claimyr (https://claimyr.com). I was in a similar situation last year with tax form issues and spent weeks trying to get through to the IRS for guidance. Was stuck on hold forever or getting disconnected. Claimyr got me connected to a real IRS agent in about 15 minutes when I had been trying for days on my own. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when an actual human picks up. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that employer gifts/prizes should generally be on the W2 as taxable wages, not on a 1099. They also explained exactly what forms I needed to file to dispute the incorrect classification.

I need to eat my words about Claimyr. After my skeptical comment, I was still desperate to talk to the IRS about a misclassification issue similar to yours, so I tried it anyway. It actually worked exactly as advertised. I put in my number, and about 45 minutes later (while I was grocery shopping), I got a call connecting me directly to an IRS representative. No waiting on hold, no getting disconnected after an hour. The agent confirmed that prizes and awards given to employees should generally be included on the W2 as taxable wages, not reported on a 1099. They also explained I could file Form SS-8 to request a determination on worker status if my employer refused to correct the forms. Totally worth it just to get a straight answer from an actual IRS employee.

This happened to me last year! It's absolutely not correct for them to issue a 1099 for employee gifts/prizes. Cash prizes, gift cards, and non-cash awards over minimal value should all be included as wages on the W2. When my employer did this, I first spoke with HR (not my manager) and showed them the IRS guidance. They initially pushed back but eventually corrected it when I mentioned Form SS-8 (Determination of Worker Status) and Form 8919. If your wife's employer won't fix this, they're essentially pushing their share of employment taxes (7.65% for Social Security and Medicare) onto her. She'll end up paying both the employee AND employer portions of these taxes on that income.

Just wondering - does the 1099 show "nonemployee compensation" in Box 1? If so, that's definitely wrong for an employee. The company is trying to avoid paying their share of FICA taxes (7.65%). Check if your wife's W2 wages seem lower than expected too. Some sketchy employers will reduce the W2 amount and shift some regular wages to a 1099 to save on payroll taxes. This is totally illegal. If her company doesn't fix this after you bring it up with HR, consider contacting your state's Department of Labor as well as the IRS. The DOL often investigates misclassification issues more quickly than the IRS.

I work in payroll and can confirm this is absolutely incorrect. Employee recognition awards, prizes, and gifts should never be reported on a 1099 - they need to be included as taxable wages on the W2. The $850 amount is suspicious too. Even if all those prizes were legitimately worth that much, they should still be processed through payroll as supplemental wages, not contractor payments. Your wife's employer is essentially trying to avoid paying their portion of Social Security and Medicare taxes (7.65%) by shifting this to a 1099. I'd recommend requesting a detailed breakdown of what specific items make up that $850. If they can't provide documentation showing exactly what prizes/awards totaled that amount, it's even more suspicious. You should definitely escalate this to HR immediately, not her direct manager. Reference IRS Publication 15-B and make it clear that misclassifying employees as contractors can result in significant penalties for the company. Most HR departments will correct this quickly once they understand the liability they're creating.