I received a 1099-MISC for a lawsuit settlement. i am being asked to file a Schedule C form, however I am not self-employed. What do i enter for bus. info?

If you receive a form 1099-MISC for a settlement, then you are not considered as self-employed and do not need to file a Schedule C.

In TurboTax, enter your form 1099-MISC and follow the interview until you arrive at the page titled Did this involve an intent to earn money?. Answer that this did not involve an intent to earn money. The amount will be reported as Miscellaneous income and will not be subject to Self-employment tax.

In TurboTax, there is a work-around. Although you may receive this income every year, say that you only receive the 1099-MISC only in 2020, not in previous years and not in 2021, you will then have the screen where you can say that it did not involve an intent to earn money.

Thanks for the info! 

I started entering the info in from the 1099-misc, what seems to be triggering the schedule C is the gross attorney fees in box 10. After I enter that number, it says I need to fill out the schedule C. But since I am not self employed, I’m not sure what to enter. It looks like the schedule c has to be filed to pay taxes on box 10? Is that right? 

It depends.  Box 10  indicates you were paid fees as an attorney.   

That would indicate you were compensated for your expertise as an attorney. 

If this was limited to expert testimony and was an isolated one time situation where you provided this and were compensated for it you can enter your Form 1099-MISC with box 10 and not complete a Schedule C. 

If you provide expert testimony on a recurring or aperiodic basis, you should complete a Schedule C and can claim any ordinary and necessary expense you incur in the line of providing ad hoc legal services.

These could include expenses for use of an office in the home if you provide these services from home. 

What Are Deductible Business Expenses

Why cant I get past schedule c?

I received lawsuit settlement from back wages. Its a 1099 misc top half and second half of document shows as a w2. 

You can enter the 1099-MISC in TurboTax as "Other Common Income" which will not generate Schedule C or SE tax.  Please use the following steps:

1. Click on Federal > Wages & Income.
2. Scroll down to the Other Common Income section. 
3. Click on the Start/Revisit box next Form 1099-MISC. 
4. On the screen Did you get a 1099-MISC?  click on the Yes button.
5. On the next screen, Let's get the info from your 1099-MISC, enter the information from the 1099-MISC.
6. On the screen, Does one of these uncommon situations apply? mark the radio button This was money from a lawsuit settlement.
7. Below the grey line, mark the Yes button to answer Was any part of the lawsuit settlement for back wages?
8. Enter the amount  that was for back wages in the box that appears.

My 1099 misc does have something in box 10.

That would be gross proceeds to an attorney. After you enter your 1099-MISC including Box 10, Turbo Tax will ask you how much of that $10,000 is taxable to you. If you indicate none, then that will reduce the taxable amount listed in Box 3.

I am having this exact same issue and it is extremely frustrating.  I can find no way around this and it keeps making me do a schedule C even though I am not self-employed.   None of the workarounds above worked.  I have used Turbotax for 5 years and this is seriously making me reconsider and just go to a tax office and do it there

Has anyone else had any luck not triggering the need to file a schedule C?

You are correct; Lawsuit settlement income in box 3 on a 1099-Misc should not generate a schedule C.  First, revisit the "Self-employment" topic and delete the business and income there that doesn't belong in order to start over.  

1. Click "Income & Expenses" tab
2. Scroll down to "Other Common Income"
3. "Show More"
4. "Start/revisit" the 1099-Misc" topic
5. Enter the form information
6. Enter a description
7. On the page titled "Does one of these uncommon situations apply?" Select "This Money was from a Lawsuit Settlement" 
8. Answer the "Back wages" question at the bottom of the page.
9. Complete the interview questions. 

Hi @DMarkM1,

I'm having the exact same issue as OP. When getting to the review/file step it gives me a loop requesting to add the proceeds paid to an attorney on a schedule c as income. I cannot file without adding the Schedule C even though lawsuit settlement checks are not reported as self income.

If a Schedule C continues to populate, it is important that you answer the questions that follow the entry screen for the 1099-MISC. If answered correctly, you will also be able to have this income flow to Other Income will not go to self-employment income. 

Please follow the instructions below:

1. Open or continue your return, if you're not already in it.
2. Search for 1099-misc and select the Jump-to link.
3. Edit your 1099-MISC.
4. Continue past the amounts already entered.
5. Describe the reason for this 1099-MISC.
6. Answer This Money Was From a Lawsuit Settlement on the screen Does one of these uncommon situations apply?
7. Answer No, it was not back wages for the next question.
8. Answer No for the question Did you have another 1099-MISC?
9. Your 1099-MISC will flow to Other Income.

Next, please make sure to delete any Schedule C or associated self-employment forms in your return.

1. Search for Schedule C with the magnifying glass tool on the top of the page.
2. Select the Jump to Schedule C link in the search results.
3. Select No to the question Did you have any self-employment income or expenses? 
4. Click on Tools.
5. Click on Delete a Form. 
6. Scroll down to your forms and look for forms you need to remove and click Delete. 

@helpmeplease2

I received a 1099-MISC for law suite settlement with the City of San Diego (my employer) and turbo tax forces me to fill out a Schedule SE even though I'm not self-employed. I've tried things listed here, but I need to know how to fix it.

You likely received two statements related to this lawsuit: a W2 and a 1099-MISC.  The W2 portion reports the amount of the settlement that was back wages and the associated taxes that were also paid and withheld on your behalf.  You should treat this as any other Form W2 you would receive.

The proceeds of the settlement that are not subject to payroll taxes are reported on Form 1099-MISC.  

Please clarify what box is checked on your Form 1099-MISC? 

As in other post, box 3 amounts should not generate Schedule C or Schedule SE in TurboTax.   Do you have any other self-employment income from Form 1099-NEC or 1099-K on this tax return?

The types of payments that would be included on this your settlement 1099-MISC form include attorney’s fees, punitive damages, emotional distress and other nonphysical injuries, and prejudgment interest. 

This is also taxable income to you and no taxes have been withheld.  

Could you clarify you answer again for box 10 and also explain on how to avoid schedule C. Because I've tried all these options and it's always asking me to file a schedule C.

I am having the same issue. This is the full picture. I received a settlement for a Class Action Lawsuit. This generated two tax forms a W-2 with taxes withheld and a 1099 MISC. I have inputted the W-2 without an issue. The 1099-MISC loops and attempts to create a Schedule C. The 1099MISC has 1800 listed in Box 3 and 1600 in box 10 for attorney fees. I follow the question in the interview. I select the box that says that these funds are from a settlement of a lawsuit. I then include that 1800 listed in Box 3 which matches the amount listed on the W-2  previously entered is from back wages. This is supported in the letter and W-2 that was sent from the law firm that says "The settlement payment constitutes wages subject to withholding." The other part is non-wage income as the letter confirms in the next sentence. The next section asks how much of box 10 is taxable. I am not sure if the full amount of none of the amount is taxable. I have done both and either direction asks me to then file schedule C.  Is the income in Box 10 Taxable? How do I bypass Schedule C as I don't believe that is correct? Thank you for your help and I hope the above description provides a full picture of the problem. 

If a Schedule C continues to populate when you are inputting your 1099-MISC, it is important that you answer the questions that follow the entry screen for the 1099-MISC. If answered correctly, you will also be able to have this income flow to Other Income will not go to self-employment income. 

Please follow the instructions below:

1. Open or continue your return, if you're not already in it.
2. Search for 1099-misc and select the Jump-to link.
3. Click Edit your 1099-MISC.
4. Continue past the amounts already entered. Make sure you enter the amount in Box 3 and the amount in Box 10. 
5. On the page Enter Taxable Attorney Fees, it is likely that the amount in Box 10 was the attorney fee. In that case, enter $0. Payments made to an attorney consist of attorney's fees plus other expenses (such as costs or settlement fees). If you cannot determine the amount of the attorney's fees or the other expenses, the entire amount is considered Gross attorney's fees. Generally, legal fees are not tax deductible and therefore, would be added to your Box 3 amount. 
6. Describe the reason for this 1099-MISC.
7. Answer This Money Was From a Lawsuit Settlement on the screen Does one of these uncommon situations apply?
8. Answer No, it was not back wages for the next question.
9. Answer No for the question Did you have another 1099-MISC?
10. Your 1099-MISC will flow to Other Income. 

Next, please make sure to delete any Schedule C or associated self-employment forms in your return.

1. Search for Schedule C with the magnifying glass tool on the top of the page.
2. Select the Jump to Schedule C link in the search results.
3. Select No to the question Did you have any self-employment income or expenses? 
4. Click on Tools.
5. Click on Delete a Form. 
6. Scroll down to your forms and look for forms you need to remove and click Delete. 

@zacharyr0b1

I deleted Schedule C and Turbotax will not let me efile the tax return.

@LenaH 

I'm having the same issue, when entering the attorney fees from box 10 it creates a Schedule C, it does not matter if I mark that this is a back wage settlement. What do I need to do about box 10 on the form

It depends. When entering Box 10 for Gross Attorney's Fees, a drop down appears for the Taxable Portion. 

Regarding the Taxable Portion: Enter the portion of the payment you received that is considered your fees on the appropriate line. This amount will transfer to the Schedule C self-employed business that you designate.

When Form 1099-MISC is marked as not back wages, it will be reported as Other Income not subject to self-employment tax. 

The lawsuit settlement will otherwise appear on Schedule 1, Line 8 as Other Income from Box 3 of 1099-Misc.

For more information regarding reporting back pay, see: About Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration.

I check several time and I can see where is asking if this was to generated money? please help

, I being asked to file a Schedule C form, however I am not self-employed. I need help to get this not to triggers schedule C? 

Here is a quick step-by-step to get you to where you want to be for your Royalty Income situation given that you state it does not pertain to "C" Income:

Personal > Personal Income > Skip W2s for now and click on "Continue" > Scroll down to "Other Common Income" section > See "Income From  Form1099-MISC" - Click on Start to the right of that line > Click on "Yes" > Fill out the Payor Field, The SS/FID # field (whichever applies), and fill in the amount for Box 2 - Royalties then click on "Continue" > If either selection option applies to you, then select the appropriate one - my guess is that for your situation this would be the first option as you state this is NOT "C" income > click "Continue" > It will then prompt you to enter Investment Information on a Schedule E. 

It was for a lawsuit settlement from his company and is asking to file a schedule c form, however he is not a self-employed.

The income should not be self-employment income.  To report taxable legal settlements in TurboTax Online, follow these steps.

• Down the far left side, click Federal.
• Across the top, click Wages and income.
• Under Your income, find Other Common Income.  Click Show more.
• Under Form 1099-Misc, click Start/Revisit.
• At the page 1099-Misc Summary, click on Add another 1099-Misc.
• Complete the information requested.
• At the page Describe the reason for this 1099-Misc, explain the reason.
• At the page Does one of these uncommon situations apply?, click on This was money from a lawsuit settlement.
• Answer Was any part of the lawsuit settlement for back wages?
• The income will be reported on 1040 Schedule 1 Part 1 line 8 Other income.