I received a 1099 NEC for a CA wait time penalty. I believe it is federally taxable but not FICA taxable as it is not wages. Is it CA taxable also?
And more importantly - how do I enter it - it doesn't really fit any of the uncommon situations (own a farm, should be on a W2, medicaid waiver etc). Do I select 'money from a lawsuit settlement?' or 'not earned as an employee or self- employed, it is from a sporadic activity or hobby'. If I choose none of these then it wants me to complete a Schedule C and enter Business Income and expenses and that makes no sense in this situation.
Thank you!
Yes, the Wait Time Penalty is taxable income for both federal taxes and California. It is not subject to FICA - although it is related to wages, it is not compensation. You enter the 1099-NEC and choose 'not earned as an employee or self- employed, it is from a sporadic activity or hobby' so that it will be included as Miscellaneous Income.
The Wait Time Penalty against the employer when there is a willful failure to pay wages due the employee at conclusion of the employment relationship.