If your settlement included back pay, your answer should be yes.
The W2 reported amounts are the back pay portion and include the appropriate amount of tax withholding.
The 1099-MISC reported amount is the amount attributable to the attorney fees amounts and other settlement fees. These should not be arbitrarily subtracted out - they do not represent the same settlement as the W2 amounts even if the dollar amounts may be the same.
You may have some deductible expenses to offset these settlement fees, but in general your attorney fees are not deductible expenses on Schedule C.
They may be deductible as Itemized Deductions on Schedule A.
How Do I Report Legal Fees From Form 1099-MISC
