ASSUMING that you deposited the money into your IRA you should have told the financial institution that this was a "restorative payment." That way the money would not be treated as a new contribution to the IRA.
In this situation you do not need to report the amounts reported on the 1099-MISC as income anywhere on your income tax return. You don't have a "rollover" situation, you have a "restorative payment" and there's no way to somehow convey that concept via the income tax return.
There are some somewhat hokey ways of actually reporting the 1099-MISC on your income tax return without reporting the amount as income but whether these methods actually prevent the IRS from asking about the "missing" 1099-MISC are more or less unknown, to me at least. IF the IRS ever does ask about the missing 1099-MISC THEN you respond with a clear, well written letter explaining the situation, including with the letter any documentation that supports the fact that this was a restorative payment, not income. That should settle the matter.
Tom Young
