Has anyone actually had their return audited over this issue? I'm in a similar situation (though smaller settlement) and wondering how risky it is to override the 1099-NEC categorization without getting the company to issue a corrected form.

I'm dealing with a very similar situation right now! Got a $30k discrimination settlement and the company also sent me a 1099-NEC. My tax preparer told me the same thing - discrimination settlements should NOT be treated as self-employment income. What worked for me was contacting the company's payroll department directly and asking them to issue a corrected 1099-MISC instead of the 1099-NEC. They were surprisingly cooperative once I explained that discrimination settlements aren't business income. It took about 2 weeks to get the corrected form, but it made everything much cleaner for filing. If you can't get a corrected form in time, definitely follow the advice about overriding in your software. Just keep really good documentation - I saved emails with the company about the settlement nature and printed out IRS guidance on discrimination settlement reporting. Better safe than sorry if questions come up later!

I went through something very similar when a small restaurant I worked at suddenly closed without giving anyone their W-2s. Here's what I learned from that experience: The Social Security Administration check is definitely your first step - if nothing shows up there, you know for certain they never reported your wages. Then Form 4852 is your best friend. Don't overthink the income estimation - just be as accurate as you can with the information you have. One thing I wish someone had told me earlier: keep detailed records of everything you're doing to resolve this situation. Write down when you tried to contact the employer, what steps you took to get your W-2, etc. The IRS really appreciates seeing that you made good faith efforts to get proper documentation before filing the substitute form. Also, don't forget that you'll probably owe both federal and state income taxes on this unreported income, plus potentially some penalties for underpayment since nothing was withheld. It's worth setting aside some money now so you're not caught off guard when you file. The important thing is that you're taking care of it properly rather than trying to hide it.

I've been through this exact situation myself and want to emphasize something that hasn't been mentioned yet - make sure you also check if your state has any additional requirements for reporting this type of income situation. When I had to use Form 4852 for a similar issue with a closed business, my state (California) required me to also file a separate state form explaining the missing W-2 situation. Some states are more strict about documentation than others, so it's worth calling your state's tax department or checking their website to see if they have specific procedures. Also, if you remember approximately when you were paid throughout the year, try to break down your estimated income by quarters when you fill out the substitute form. This can help minimize any underpayment penalties since the IRS calculates those based on when income was actually earned versus when taxes were paid. Even rough estimates like "I earned about $X in Q1, $Y in Q2" etc. can make a difference in the penalty calculation. The good news is that once you get through this process, you'll have all the documentation you need and won't have to worry about this particular income being questioned later. The IRS really does work with people who are making honest efforts to comply.

Have u already entered the business as inactive or closed in TurboTax? Sometimes thats all u need to do and it will stop asking for forms. I had this issue last yr with schedule C stuff from my etsy shop that i closed in 2021.

This is a really common issue with TurboTax! Since you haven't had any business income since 2019 and the business is essentially closed, you shouldn't need Form 8895. The problem is that TurboTax is probably still treating your business as "active" in its system. Here's what I'd recommend trying first: Go to the Business section in TurboTax, find your business entity, and look for an option to mark it as "closed" or "inactive." This should stop TurboTax from requiring forms related to ongoing business operations. If that doesn't work, you have a few other options that people have mentioned here - the taxr.ai tool seems to help people figure out exactly what's triggering these form requirements, or you could try calling the IRS directly (though Claimyr might save you the hold time). The good news is you definitely don't need to wait until January 19th to file your return if your business has been inactive for years. There's just a setting somewhere that needs to be updated to reflect your current situation.

Quick question about the timing - if I operate as an LLC now but want to switch to S-Corp, can I do that midyear or do I need to wait until January to make the change? I just learned about this strategy and don't want to wait 6 months if I don't have to...

I made this exact transition from LLC to S-Corp election about 18 months ago when my consulting business hit similar revenue levels. The strategy absolutely still works, but you need to be strategic about it. For your $135K revenue, you'll likely want to pay yourself somewhere in the $70-85K range as W-2 salary (this varies by industry and location). The key is documenting WHY that's reasonable - look up comparable positions on salary websites, consider your education/experience, hours worked, etc. The tax savings can be significant - you'll save about 15.3% in self-employment taxes on the distribution portion. But factor in the additional costs: payroll processing (~$100/month), S-Corp tax return preparation (~$800-1500), and your time for compliance. One tip that saved me headaches: set up your payroll to pay yourself the same amount each month rather than trying to optimize it quarterly. Makes bookkeeping much cleaner and looks more legitimate to the IRS. Also, make sure you're actually taking those distributions regularly throughout the year, not just on paper at year-end. The paperwork isn't terrible once you get systems in place, and the tax savings usually justify the extra complexity at your income level.

Last year I had the same issue with SBTPG and Credit Karma. The message changed to "in queue" on a Thursday, and I was checking my bank account literally every hour. Nothing Friday, nothing Saturday, nothing Sunday... finally got it Monday morning. I called SBTPG twice and got different answers each time. One rep said it was "processing normally" and another said there was a "batch delay." Now I just file directly with the IRS and get my refund sent straight to my bank. Yes, I have to pay the preparation fee upfront, but I get my full refund 3-5 days faster. Is it worth the extra waiting time to have the fee taken out of your refund instead of paying upfront?

I'm dealing with the exact same situation right now! Got the "direct deposit in queue" message from SBTPG yesterday around 1 PM and still nothing in my account. What's frustrating is that my IRS transcript shows my refund was already sent to them on Monday, so they've had my money for 3 days now. I understand they need time to process fees, but the lack of transparency is what gets me. Their automated system just keeps saying the same thing with no actual timeline. Next year I'm definitely paying the prep fees upfront and having my refund go directly to my bank - this middleman situation is way too stressful when you're counting on that money for bills.