We didn't receive employer's penalty payment until not quite three years ago. I believe the statute of limitations is still running; however, we do not expect employer to help. The payment declared on the 1099-MISC was the equivalent of 30-days' wages because employer refused to pay balance of vacation pay for almost a year. No attorney was involved. Had to sign waiver not to sue. Could not collect unemployment because wages were overstated, could not verify income. Took almost two years to straighten that out and could not file tax return until corrected W-2 was issued. Asked employer to pay penalty withOUT my going to CA agency to demand it. Mom died same time as forced retirement/layoff. Sister died, son murdered soon before. Dealing with audit, illness, and did not notice strange 1099 when it arrived in 2019. Playing catch-up. Tax-preparer wife also ill. Our understanding is that the penalty payment is taxable AND our questions are: (a) because I could not collect unemployment and also suffered LOTS of trauma dealing with bureaucratic nightmare of change in accounting firms at time of my termination and inability to get new firm to give me accurate accounting, we feel this payment should NOT be taxable, (b) instructions say to enter 1099-MISC income on Schedule C, which automatically brings up SE tax. I was NOT self-employed. Even if this payment IS income, I definitely do NOT want to pay SE tax on it, and (c) the way the software works, we do not get full credit for our new EV bought in 2018 AND we are not allowed to benefit from carry-forward of solar installation from 2017 because it appears that these two credits are not allowed to offset the new income and SE taxes. Final question: Does your reply below still hold? putting it in and then taking it out? (I sincerely hope so)! I am most grateful for your attention and expertise. Thank you.
