You should report the W-2 on your return, as IRS information return matching programs will look for it, and to get credit for any tax withheld.
However, if you don't have a filing requirement because most of your income is from SSA, you could opt not to file.
If SSA is requiring that you present a copy of a return to them, then go ahead and prepare a return and share the explanation with SSA directly including a copy of any information about the lawsuit that establishes the period of time for which you were attributed wage income.
If you are using TurboTax Desktop, you can go to Forms mode, open the W-2 that you entered, and click on the "+" next to Box 1. There, you can add notes explaining that the wages were from a lawsuit settlement and not current income from working.
See this help article for other information about reporting legal settlements.
See this IRS article and IRS Publication 4345 for more information about the tax treatment of lawsuit settlements.
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