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When you enter the 1099-MISC, be sure to select "This was money from a lawsuit settlement" AND "Yes" to "was any part of the lawsuit settlement for back wages"

Enter the amount from the 1099-MISC

Continue through the interview. 

It is a little complicated, but the IRS needs to make adjustments for your FICA (Social Security and Medicare) tax which the employer should have withheld and paid 50% of. You will see your share (what should have been withheld) on Schedule 2 line 4.

It will not be self-employment. There will be no Schedule C. 

This 1099-MISC is entered under

Wages & Income

(Scroll down past Self-Employment)

Other Common Income

Form 1099-MISC