@KPChin You reported the income correctly. The problem is that your 1099-MISC was completed incorrectly by the payer. Your settlement income should have been reported in Box 3 of the 1099-MISC, not Box 7. (Income reported in Box 7 is regarded by the IRS as self-employment income.)
You should try to obtain a corrected 1099-MISC from the payer. Alternatively, contact the IRS using the contact information on the notice you received, and explain the situation.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
