If the entire settlement was $3000, that entire amount is taxable. Assuming that the gross wages in box one of the W-2 or $2800, the other $200 might be interest, or punitive damages, or it might have been a subtraction for attorney fees. But regardless, the entire amount is taxable. After reporting the W-2, which covers the first $2800, you would enter “other uncommon income“ or “other miscellaneous income“ in the amount of $200.
if New York State taxes were withheld but you were not a resident of New York State when you had a relationship with this company, then you would file a nonresident New York State tax return as part of your 2021 tax return package. You would report zero New York State taxable income and you would report the withholding, which would generate a full refund of the amount withheld. New York might send you a letter asking why you had New York taxes withheld, and you would have to send a letter back explaining the circumstances.
