Unfortunately, the recent law that exempts unemployment benefits from federal tax only applies to benefits paid through state and federal unemployment insurance programs - it does not apply to payments from employers made in lieu of unemployment benefits.
In order to qualify for the recent tax exemption, payments must be reported on Form 1099-G Certain Government Payments.
Since your employer reported this income on Form 1099-MISC and did not withhold taxes (income, Social Security & Medicare), you will have to report it as "self-employment" income. This method is necessary in order to properly calculate and report your tax obligations. You will have to pay both your personal share of employment taxes (Social Security & Medicare) and your employer's share.
Enter the 1099-MISC in the Income from 1099-MISC interview in Other Common Income.
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Type "1099 misc" in the search window
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Click on "jump to 1099 misc"
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Enter the information from your Form 1099-MISC, and click on Continue
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Enter a description and click on Continue
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Answer "Yes..." to "Does [Unemployment replacement] involve work that's like your main job?"
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Answer "I got it in 2020" when asked "How often did you get income for [Description]?"
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Answer "Yes, it did involve an intent to earn money."
