As explained previously by several users in this thread, the California penalty on employers for not providing a final paycheck timely is not treated as wages, and is not subject to payroll taxes, nor to self-employment tax, but is taxable as miscellaneous income.
To enter this income item in TurboTax:
- Go to the Income section
- Scroll down to "Other Common Income"
- Scroll down to "Income from 1099-MISC"
- Enter the 1099-MISC
- Enter "CA Wait time" as Description
- Select "None of these apply"
- Select "No, it didn't involve work"
- Select "...got it in 2023"
- Select "No, it didn't involve an intent to earn money"
See this Ernst & Young Tax News Update that explains IRS Chief Counsel Letter 2016-0026 regarding this issue.
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