W-2 & 1099-Misc vs law suit settlement

[rhoffman2]

I received notification that I was to receive $2,994 as settlement for a class action law suit.  The letter telling me this said 50% will be considered back wages and 50% will be considered income interest, liquidated damages and penalties.  I received a check for $2,416.  I then received a W-2 for $1,475 and a 1099-Misc for $2,994.  That totals $4,469.   Am I to now pay taxes that amount?  I only received $2,416.  Could this be correct?  

[AmyC]

No. The people issuing payments messed up. The 1099-MISC should have been the $2994 minus the wages of $1475. Call them and see if they will issue a corrected 1099-MISC.

If not, we can work around by deducting the extra income with an explanation but that is a bit of a red flag with the mismatched forms.

Try to get them to straighten it out. If they won't, you will need to follow these steps to enter the negative income:

1. go to the federal income section
2. scroll to the bottom
3. Miscellaneous Income, 1099-A, 1099-C, Start
4. Scroll to the bottom
5. Other reportable income, Start
6. Other taxable income?
7. Select YES
8. Description: 1099 MISC was incorrect or whatever you want to say
9. Amount, enter your amount as a negative. Example:  -1519
10. Continue