My husband also received a W-2 and a 1099-MISC form with identical amounts from the lawyers handling a class action discrimination lawsuit. It was explained to him that the W-2 was for back wages and the 1099-MISC was for non-economic damages (pain and suffering). From what I have read online, I believe this is income and is taxable. The 1099-MISC included Attorney fees. TurboTax is insisting the 1099-MISC be associated with a sole proprietorship business and wants me to create a Schedule C. I have read that this is unnecessary but I don't know how to get TurboTax to understand that. I found in the IRS 2020 tax instructions for 1040/1040-SR, that I can deduct the lawyer fees as UDC on Schedule 1 up to the amount of the gross income received in the settlement. I believe the gross income would be the amount on the W-2 plus the amount on the 1099-MISC. Let me know if I have interpreted anything incorrectly.
