I retired from my job on 1/1/2021. In July 2021 I received a check from my former employer. Then earlier this year I received a 1099 MISC. There was no Federal or State income taxes showing on the 1099. I called my employer asking what the check was for and why no taxes were deducted. They said that it was a California Compliance issue where they had to pay a penalty because my last paycheck was not deposited into my account within 72 hours of my termination of employment date. I added the 1099 into Turbo Tax but it wants to treat this like a business, asking for a business name and it wants a principal business code. I'm not sure how to correctly try and process this 1099. I don't have a business or a business code.
That is not really income it is a settlement. You can enter it as follows and not be subject to self-employment.
If you do not follow this posting procedure it will result in self-employment. You would also have to pay 15.3% in self-employment tax (Social Security & Medicare).
Then I take it that I shouldn't have to put anything in the Business Income and Expenses area? If that's correct, then I think I should be good!
Yes, that is correct. This is not business income and likewise is not subject to social security or medicare taxes. As our awesome Tax Expert @JohnB5677 stated, it is a legal settlement.