I received insurance payments for lost wages due to an accident, not related to a business. Why is the software forcing me to use Schedule C instead of "Other Income"?

I received payments from my insurance company for lost wages due to a temporary total disability caused by an accident. These payments were deposited directly into my bank account and are not related to any business, self-employment, or professional activity. Despite this, the software is forcing me to report the income under Schedule C, requiring me to provide a business name, code, and accounting method. However, this is not a business, and these payments are simply a replacement for wages lost during my recovery period. I need help understanding why the software directs me to Schedule C instead of allowing me to report this as "Other Income" or another appropriate category. Please clarify how to correctly categorize this type of income.

14310

Expert Alumni

Jan 19, 2025 12:58:54 PM

The income from lost wages would be reported as miscellaneous income, not Schedule C income. To enter this in TurboTax you will follow these steps:

Sign in to TurboTax and open or continue your return.
Click Wages & Income
Click add more income
Click Other Common Income
Click Start next to 1099-MISC
If you're asked Did you get a 1099-MISC?, answer Yes.
1. If you've already entered a 1099-MISC, select Add Another 1099-MISC.
Input the information from your 1099-MISC and select Continue.
On the Describe the reason for this 1099-MISC screen,
type in lawsuit settlement and select Continue.
On the Does one of these uncommon situations apply? screen, select This was money from a lawsuit settlement and then answer the back wages question before selecting Continue.

Steps for entering a 1099-MISC can be found at:

How to enter 1099-MISC

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I received insurance payments for lost wages due to an accident, not related to a business. Why is the software forcing me to use Schedule C instead of "Other Income"?