1099-MISC for Merino v. Wells Fargo

[MileHighDenver]

I received a W-2 for backwages and a 1099-MISC for the same lawsuit. For the TurboTax Desktop, I entered the W-2 (all boxes) and when I am trying to enter the information for the 1099-MISC, I have box 3 and box 10 with information. However, when TurboTax is asking how much is taxable attorney's fees, what amount do I enter? It seems that if I type in anything other than "0," it is requiring me to complete a Schedule C, even though I am not self-employed. Additionally, when answering the question "Was any part of the lawsuit settlement for back wages," if I answer yes, then it seems like I am getting taxed twice (1 time from entering the same amount from the W-2, as well as the yes answer from the 1099-MISC) - should I answer yes or no on this question?

Additionally, the 1099-MISC that was sent was just Copy B - keep for your records. However, upon reviewing everything, it looks like if I complete the 1099-MISC and enter the W-2 form that was sent with it, I am getting taxed twice - Box 1 from W-2 is included in 1040 line 1, as well as the box 3 from 1099-MISC is included in line 8 - is this right?

[MaryM428]

Do not enter the 1099-MISC if it double taxing the money.  Just save it with your 2020 income tax records.

If you did not receive the W-2 then you would have entered the 1099-MISC as Less Common Income, but you do not enter the same income twice.

Where do I enter a 1099-MISC?

[MileHighDenver]

Thank you, @MaryM428 !

Just a side question. The check that I received was a total of roughly $2,800, which according to the lawsuit documents, it is comprised of 1/2 backwages (thus the W-2 that had federal and state taxes withheld) and 1/2 "non-wage income for interest, liquidated damages, and any statutory or civil penalties available under any applicable local, state, and federal laws. Accordingly, IRS Forms W- 2 and 1099-MISC for your Settlement Payment are enclosed. You will need these Forms when you file your tax return for the period January 1, 2020 through December 31, 2020."

Therefore, I am under the assumption I would have to file the W-2 and the 1099-MISC, but TurboTax is then asking of the $1,583.57 is "Taxable Attorney's Fees." After reading articles, it seems like attorney's fees that are paid directly to the attorney's are taxable to me, so I would enter the $1,583.57 in the box. This then creates TurboTax to create a Schedule C - even though I am not self-employed by any means. Is this correct? If so, then what would I put for the Schedule C information, e.g. business name/description, etc?

[DawnC]

Answer No to the taxable attorney fees.  It doesn't need to go on Schedule C as you have the W-2 for the employment portion of it.    The 1099 amount for non-wage income is taxable to you, but it is not self-employment.   When you go through the 1099-entries in the Other Common Income section, you have to answer the questions so TurboTax does not enter this as self-employment.   It should be reported on Line 8, Other Income on Form 1040. 

To enter a 1099-MISC in TurboTax:

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. Answer Yes to Did you get a 1099-MISC?
   • If you already entered a 1099-MISC, you'll be on the 1099-MISC Summary screen, in which case select Add Another 1099-MISC.
   • If you need to edit or delete a previously-entered 1099-MISC, select the appropriate button.
4. Enter the info from your form into the corresponding boxes.

In the series of follow-up questions, indicate it was a settlement and answer Yes to the back wages questions.  Enter the amount from Form 1099 (should be the portion of your check that was not on the W-2) and the income will go to Line 8.   

[MileHighDenver]

Thank you both very much! Appreciate it 🙂

[bxkul]

MileHighDenver,

I received the same form - to clarify were you advised to only add the W-2 part of the form and not the 1099-Misc? I was having the same issues. 

Thanks! 

[MileHighDenver]

You input the W-2 section with your W-2, then the 1099-MISC section is inputted in the “other income” section, not the 1099–MISC section (otherwise you will have to do the self-employed information). That’s how I was able to get it to work and my tax returns were accepted by the IRS without any issues

[bxkul]

MileHighDenver,

What did you input for the "taxable attorney fee" box?