This is what should be done:
- The 1099-MISC should have the amount in Box 3.
- As the surviving spouse who received the money, the 1099-MISC is correctly in your Social Security Number and should go on your tax return (it should probably have your name on it, but having his name on it won't hurt anything).
- The amount should have been added to Boxes 3 and 5 of his W-2 (Social Security and Medicare), but NOT Box 1 (taxable income). Because of this, it is NOT taxed twice.
- You can enter it as "other income" on your tax return.
If the employer did that, everything is correct.
