Entry depends on whether this settlement was for wages or something else. Since the income is issued on Form 1099-NEC my instruction will assume it was for back pay or wages.
Any part of the 1099-NEC that is for back wages and allowed to be issued in that manner must be included as income on Schedule C.
Social security and medicare taxes are required to be paid on compensation, i.e., this income. based on the document received (Form 1099-NEC). This is assumed due to the way it was reported. If this was not back wages, then another approach can be used.
You can use these steps to report your settlement from a lawsuit. The steps will report the lawsuit 1099-NEC adding any taxes.
- Federal > Search (upper right) 1099nec > Click the Jump to... Link to proceed.
- Fill in info from the 1099-NEC
- Describe the reason for the 1099-NEC as Lawsuit Settlement
- Does one of these uncommon situations apply? check This was money from a lawsuit settlement
- Answer Yes Was any part of the lawsuit settlement for back wages?
- Enter the amount that was for back wages
Please update here if you need further assistance.
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