I received 1099-misc for nontaxable lawsuit settlement. TurboTax calculating tax. I put amount in box 7, said it was lawsuit settlement not for wages, but tax calculated.

[gelp1025]

Thank you Critter 3 and Hal_Al for the helpful information.  It's truly appreciated!

[brianpdaniels]

I have the same issue.  How did you file it, and did the IRS send you a letter about it.  I just got a letter.  I put it in line 8 of schedule 1, but like you they reported it in box seven instead of three. 

[Critter-3]

This is why I suggested the Sch C route earlier ... less chance of an IRS letter   ... now all you can do is simply respond to the IRS notice to explain why you should not owe SE taxes on the 1099-misc box 7 amount.  

[Lyndseymjo]

How would the information be entered and credited if it were reported on 1099-NEC instead of 1099-MISC? 

[Hal_Al]

The 1099-NEC is new for 2020.  For purposes of the thread above, it is the same as having received a 1099-Misc with the amount in box 7.

The IRS considers anything on a form 1099-NEC to be self employment income. Enter the 1099 income, at Other Common income / income from a 1099-NEC . TurboTax (TT) will complete Schedule C  for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security & Medicare) on any profits greater than $432. These types of payments are frequently done this way. Your "employer" is not the only one.

If you feel that this is not self employment income, see above for how to work around reporting it, on Schedule C, as self employment. 

[Lyndseymjo]

It doesn't report on Schedule C.. when I enter 1099-NEC under personal it adds it to Schedule 1 1040. My question is then how to make the adjustment on Schedule 1 Part II Adjustments to Income to get the same amount to credit. 

[Hal_Al]

@Lyndseymjo 

The "crediting" does not go on Part II (Adjustments) of Schedule 1. Instead, it is a 2nd (negative) entry on line 8 of Schedule 1*. 

 In TurboTax (TT), enter at:
- Federal Taxes tab
 - Wages & Income
Scroll down to:
-Less Common Income
      -Misc Income, 1099-A, 1099-C
       - On the next screen, choose – Other reportable income - Enter the number with a minus sign (-) in front. Briefly explain at description.

But, you haven't said why you got this money.  Telling you how to enter it, as offsetting amounts, doesn't necessarily mean that's how it SHOULD be entered.

* On 2018 and earlier  forms, it went on line 21 of form 1040.

[magbart]

IT WAS A CLASS ACTION LAWSUIT CREATED BY PEOPLE WHO WHERE HIRES WITH A GUARNTEED HEALTH INSURANCE PROGREM THE EMPLOYEE WAS HIRED UNDER CONTRACT. IN 1990'S THE COMPANY CHANGED OVER TO ANOTHER PLAN AND IT DID NOT PROVIDE THE BENEFITS THE ORIGINAL PLAN DID. THEREFORE THE PEOPLE WHO WERE EFFECTED FILED A LAWSUITE AND WON. I RECIEVED 1000 FOR MY DECEASED HUSBAND WHO WORKED THERE AND ANOTHER 1000 AS A SURVIVOR. PROBLEM IS SOCIAL SECURITY HELD UP MY MONTHLY CHECKS THINKING I WAS WORKING A JOB AND NOT REPORTING IT. THE LAWSUITE ATTORNEY SAYS IT'S NON TAXABLE BC IT HAS TO DO WITH MEDICAL BENEFITS? THANKS