Bug in 1099-MISC, amount in box 3 considered self-employed income, nothing in box 7

[dhob]

We received a 1099-MISC and W2 from a lawsuit for back pay.  The 1099-MISC only has an amount in box 3 and I indicated that the form is from a lawsuit and enter the amount of back wages.  Turbotax is adding a $117 self-employment tax.  We are not self-employed.

[Carl]

Reporting 1099-MISC (box 3 or box 7) that is not self-employment income

Under the Wages & Income tab (or Personal Income tab) scroll down to Other Common Income and elect to start/update Income from form 1099-MISC. Then click YES to indicate you have a 1099-MISC.

Enter the 1099-MISC exactly as printed, and then Continue.

Enter the reason you got this money – be it scholarship, bonus, streaking [removed] across the 50 yard line of the super bowl, whatever. Then continue.

Select None of these apply, then Continue.

Select No, it didn’t involve work….. and Continue.

Select ONLY the tax year for which this specific 1099-MISC was issued. Do not select the year that you received the 1099. Select the year for which the 1099-MISC was issued. Select no other year. Then Continue.

Select No, it didn’t involve an intent to earn money, then Continue.

Select NO, then Continue.

Click the DONE button, and that does it.

[dhob]

That worked after deleting the old form and adding a new form.   Is this the correct way of reporting back pay from a lawsuit?  Seems wrong to say that it was not from a lawsuit and enter the wages or is this okay since I added a W2 for this income?

[Carl]

I'm not able to make sense of your last comment. Why did you add a W-2 for the income? Did you receive a W-2 for it? If you did, then that income should NOT be included anywhere on the 1099-MISC you received. If you did not receive a W-2 for that income, then you should not (and can not) report it in the W-2 section. If income reported to you on a W-2 was included in the 1099-MISC, then you need to contact the issuer of that 1099-MISC and have them issue you a corrected 1099-MISC.

[dhob]

We received both a W2 and 1099-MISC.  The settlement was for $1,651.60, Wages=$825.80, Non-Wages: $825.80.  I think your instructions were correct for the Non-Wages.

[tdjohnson2019]

I know this question is over a year old but i have the same issue. Received payment for an OT settlement. Total was $2,348.44 but they sent a W-2 for $782.74 with taxes withheld and 1099-Misc for $1,565.70. Entering it as a lawsuit seems most appropriate but re-entering $782.74 as a portion of the wages double taxes them and the $1565.7 wasn't for wages. But I'm getting a prompt to complete schedule C.

[Carl]

To me, it seems obvious the $782.74 on the W-2 was for the overtime. But what specifically was the 1099-MISC for? Reimbursement for your legal fees? Something else? It also matters in which box on the 1099-MISC the $1565.70 is reported in too. So we need to know that.

[tdjohnson2019]

Carl, the $1,565 was considered penalties and interest and is reported in box 3 as Other Income.