I have 1099-misc for a contract settlement from my former employer. The revenue is in box 3. Should this be a settlement payment even though there was not a lawsuit?

[mmcdv]

Not sure what to mark as the reason for receiving payment? Should I need to pay self-employment taxes on this?

[Bsch4477]

For miscellaneous income reported on Form 1099-MISC

If you received a Form 1099-MISC for something that is not related to self-employment, follow these steps in TurboTax Online: 

1. Sign in and click Federal in the left-hand menu.
2. Select Wages & Income.
3. Scroll down to the Other Common Income section and click the down arrow.
4. Click Start next to Form 1099-MISC.
5. Follow the prompts and enter the information from your form.
6. When asked if the work involved an "intent to earn money," answer No. This will ensure it is treated as miscellaneous income rather than self-employment income. 

[Opus 17]

It depends on what the payment is for.  If it is for lost wages, it should have been reported on a W-2.  You don't  need to pay 15% self-employment tax, but you do need to pay 7.65% social security using a form 8919.

A payment for physical injury is not taxable at all.  There are a couple of ways to deal with the 1099-MISC on your tax return, that are more or less correct, depending on how you are filing. 

It might be a settlement because they invested your 401k in an illegal way, and this is compensation for lost income in the 401k.  There are special rules for that situation that I don't know off the top of my head.  

Other payments will be taxable as simple miscellaneous income, just list the 1099-MISC as taxable income.  That might include payment for mileage that the employer should have paid, or if the employer made you buy your own uniforms and is now reimbursing you.

Without more details, we really can't say how this payment should be taxed.