Schedule C NOT Needed

[CaryG]

I have a 1099 Misc that includes legal fees for the settlement of a class action suit against my employer.  

I keep getting an error message when I do my final check that I need to attach this to a Schedule C, but it is not a business.  Personally I would like to do that because I could then take an above the line deduction for the attorney fees.  So is this truly an error, or do I skip it OR can I used a Schedule C to report this and take the above the line deduction?

[JeffreyR77]

The award for legal fees is taxable income. 

The employment portion of your settlement included the tax portion and was reported on a Form W2 including these taxes. 

The 2017 Tax Cuts and Jobs Act eliminated the ability to deduct legal fees on Schedule A.  

You should revisit the Personal Income section where you entered this Form 1099-MISC. 

Verify the amount is entered in Box 3. 

On the next screen enter Lawsuit settlement as the description of the payment. 

On the next screen verify This was money from a lawsuit settlement is selected from the list. 

Verify that you have answered the question Was any part of this settlement for back wages:  No. 

This settlement is in reference to the payment and the dollars included on the Form 1099-MISC not the overall lawsuit. 

Answering  this way should remove the errors you are receiving from the review.

[CaryG]

THANK YOU.  That is exactly what I did, and Turbo Tax still keeps wanting me to tell it which Schedule C this is related to when I do my final check.  Obviously a glich in the Turbo Tax system.

[JeffreyR77]

Do you have other Schedule C activities?  Please clarify which version of TurboTax you are using?

[CaryG]

Yes I do have other Schedule C Activities.   I work part time as a Realtor.  No issues with that.

I am using Turbo Tax Home and Business.

Thanks.

[DawnC]

So, you should have only 1 Schedule C for your realtor expenses.  The other 1099-MISC (with the amount in Box 3) should be listed as other income.   I am going to suggest deleting that 1099-MISC and re-enter it.     Do a search for 1099-misc which will show you a list of all of your 1099s.   You may have it listed 2x, in this case, delete both of them.  

When you re-enter Form 1099, answer NO to this being related to your main job and NO, it is not an attempt to earn money.   Also, when you are asked about the frequency of the payments, make sure you enter that the payment was for 2020 ONLY.    If you indicate that you have received it in the past or expect to receive it in the future, TurboTax will prompt you for Schedule C.  

The income will show on Line #8, Other Income rather than self-employment.  Check your Form 1040 to verify it is in the correct place.  The review prompt should not occur as long as you deleted your previous entries.  

[CaryG]

Still not working.  Is it the gross proceeds paid to the attorney in box 10 of the Misc-1099 that is causing the issue?

[AmyC]

Yes! Box 10 should be left blank since you did not collect the fees.