Get your taxes done using TurboTax

After reading a little bit of the California law, and assuming that this 1099 only includes the penalty, and your regular wages were eventually included on your W-2, then I agree with the turbo tax expert. This is “other income”, and is not subject to self-employment tax, although it is subject to regular income tax.  Follow her instructions on how to delete the schedule C and report the income as “other.”