1099-MISC for California proactive pay

[taxqn24]

Got 1099-MISC from my previous employer for California Proactive Pay - the amount is in Box. 3.

W2 says this is non taxable comp. (I think this is pay for each day between last work day and final pay day at pre-resignation rate)

While answering in TT:

Did the CA state Proactive Pay involve work that's like .... main job?  —> I Entered “No”
Did the California Proactive Pay involve an intent to earn money? —> I Entered “No”

Can somebody confirm if these answers are correct?

[DianeW777 · Accepted solution]

Yes, you are answering the questions correctly. It isn't required to be reported like it is wages, but it is taxable income on your federal return.

• 'No' on the screen 'Did the '____' involve work that's like your main job?'
• 'No' on the screen 'Did the '____'  involve an intent to earn money?'

California "proactive pay"—commonly referring to California wait time penalties (labor code violations for late final wages)—is reported on Form 1099-MISC (Box 3, Other Income) because the IRS determined these penalties are not considered wages or compensation for services. Consequently, they are exempt from federal withholding, Social Security/Medicare (FICA), and unemployment (FUTA) taxes, making W-2 reporting inappropriate

California taxes wait time penalty (labor code § 203) as taxable income, although it is not considered "wages" for payroll tax purposes.