When you get a 1099, it is for something taxable. So the problem is, when you enter it, there is no where to mark it as not taxable. Here is a way to zero it out on your tax return. It is a work around, because IRS does not provide an easy way to override the way the employer issued it. Just keep your emails and settlement papers in case the IRS asks about it. You have your justification for showing it as not-taxable. See next comment.
