My research on this forum makes it clear that we must report a lawsuit settlement in 2019 (for back pay in previous years) as wages this year (2019) and must pay federal taxes on the gross proceeds, not the net amount after lawyer fees. In the settlement, my employer refuses to issue a W2, withhold for taxes, or contribute to my public pension. As a police officer with a public pension, we do not pay social security but do pay medicare. I've created a substitute W2 that shows $20k (settlement amount) for federal income, $20k for Medicare wages, and $0 for Social Security wages. The format of this extra W2 mirrors the W2 that the City will provide for 2019 wages. This seems logical and relatively easy to achieve in TT. However, when I submit this extra W2, the program does not appear to apply any Medicare tax to the $20k settlement amount on the W2. It does generate a Form 4852 which I'm advised to mail to Social Security if I want credit for this income. Since I don't pay Social Security and don't get social security benefits from this job, this seems unnecessary, unless it's the only way to pay the Medicare tax that I owe on the $20k settlement. Any advice on how to resolve this Medicare discrepancy either within or outside of TT? Thank you!
