If i have a 1099-misc showing an amount that is "interest paid" on backpay paid to me in 2016 where in turbo tax deluxe should this be entered?

[tsc12169]

This money was for interest on backpay which a previous employer paid to me in 2016. If I enter this 1099-misc in section for 1099's it processes it as money received as a sole propriertorship 

[KittyM]

Your 1099 SHOULD be entered as "Interest Income," but since you do not have a 1099-INT, putting it there will confuse the IRS, which has an excellent income matching program.  You should start by requesting a corrected document.  If you cannot get one, follow the instructions below:

To enter your 1099-MISC on your return:

• Choose the Federal return and the Wages & Income tab.
• Scroll down to Less Common Income and Show more.
• Choose Miscellaneous Income, 1099-A, 1099-C.
• Choose Other Reportable Income and say Yes.
• Even though the screen says "Do not enter income reported on Form 1099-MISC", this is where you will enter the description "1099-MISC for Interest Paid on Back Pay," the amount you received, and who received it, if necessary.

[hatchness]

I have a similar situation where I received a 1099-MISC, but it was really interest earned on crypto holdings (they even label the accounts as interest bearing accounts, but for some reason, they've been guided by their tax/law team to issue 1099-MISC). The solution makes perfect sense, but I'm curious if this will create an audit flag, since there will not be a corresponding 1099-MISC submission to match with what the IRS received? In my case, it's relatively negligible amount of self-employment tax owed, and trying to weigh the risk/benefit of just paying the tax to lower the risk of being audited. Although, I certainly hate to pay any taxes that I shouldn't be obligated to pay. Thanks in advance.

[DMarkM1]

The income will match what the IRS has and the description will add clarity. The steps KittyM outlines above are sound.