The termination wages are properly reported on a W-2 per IRS rules and a recent court case.
The interest is more complicated. A 1099-MISC box 7 is probably wrong; I would be more inclined to report it either on a 1099-INT or as part of the W-2 wages. If you report it as any other than self employment income, the IRS will probably send you a letter asking for an explanation or payment of the tax. You may want to pay for professional advice.
if you want to treat the money as W-2 wages, I believe that after you enter the 1099 there is a listing of special circumstances and a box you can check that says something like “this money should have been on my W-2“. That will cause TurboTax to add it to the W-2 and prepare a special form, you would not need a schedule C and you would pay the employee half of Social Security and Medicare tax but not the employer half.
to treat it as interest, I would leave the 1099 off your tax return entirely. Add the amount of interest in the interest portion of the interview. Don’t e-file; print your return and file by mail. Attach a copy of the 1099 and a written explanation as to why you are treating it as interest instead of self-employment income.
