I owned a small company that went out of business with the last payroll paid at the end of August. One employee was paid a severance payment in May of 2022 as part of a settlement. It was the only money he received in 2022 as he was laid of at the end of 2021. I paid it as a 1099, but just read (I am doing end of the year filings) that it should have been paid as payroll with the appropriate federal taxes withheld. How do I fix this? I will need to pay the payroll taxes due on the amount and a late penalty since the payment was made back in May. I also need to issue the employee a W2 for the payment but since I processed it as a 1099 I don't know how to change it.
