So, please clarify how to enter the penalty portion of my settlement in TurboTax. I was part of lawsuit regarding unpaid overtime wages. We won the suit, and I received one check identified as a portion for back wages and the second portion as their penalty payment. They sent w-2 taking out taxes on wages for 1/2 settlement and a 1099-misc for the penalty portion. Some site say I shouldn't have to pay payroll tax nor SS etc on penalty portion. Please advise
