Per IRS, the reason why the amount is being reported in this box is due to the payment you received for providing medical and health care services that cost at least $600. Does this sound right to you ? You mentioned this is a legal settlement, which should not be subject to Schedule C and self employment tax. I will suggest you to contact the issuer to clarify and might need to obtain a corrected 1099. ( IRS also receives a copy of your 1099 MISC, it is important to report the information correctly on your return so they both match. )
For legal settlement, if this is related to physical injury/ sickness or emotional distress due to the injury, it will not be taxable to you.
Generally, the amount should be reported in box 3 of the 1099 MISC. As you entering the information under 1099 MISC in the program, it will let you choose the option of legal settlement. If this is not related to physical injury, you will need to back it out as a negative amount under
Federal / Wages & Income / Less Common Income- Miscellaneous Income / Other Reportable Income-Start.
If this is not related to any physical injury related, it will be taxable to you at your regular tax rate without the self employment tax.
