i have a client who received a 1099 misc from her union with an amount in box 7-non employee compensation. apparently she received a settlement of a union greivance. i would think this should be reported in box 3 as box 7 would subject it to se tax. am i correct? if so i was going to zero it out on sch c and pick it up on line 21. any thoughts?
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The instructions for Form 1099-MISC tell you to put damage awards in box 3. However, if the damages are for back wages, then they go on a W-2.
I would zero it out on Schedule C to get rid of the SE tax and then report it on line 21. If audited, have good notes to explain why it was zerod out on Sch C and why the damages were not for back wages.
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