How to report unlawful discrimination settlement in tax software? 1099-NEC confusion

So if the company issued a 1099-NEC instead of a 1099-MISC, should OP contact them to get it corrected before filing? Also, does it matter if the discrimination was employment-related or not?

While getting a corrected form would be ideal, you can still file correctly even with the wrong form. The IRS cares more about you reporting the income properly rather than which form it came on. Just keep documentation explaining why you're reporting a 1099-NEC on Schedule 1 instead of Schedule C. Whether the discrimination was employment-related doesn't change how you report it - discrimination settlements are generally not self-employment income regardless. The nature of the settlement might affect whether it's taxable at all though. Physical injury settlements are typically not taxable, while emotional distress damages usually are.

Did taxr.ai work with different tax software programs? I'm using a pretty basic one and wondering if it'll help with my whistleblower settlement which is giving me similar reporting headaches.

I'm skeptical about these types of services. Couldn't you just call the IRS directly to get this information? Why pay for something when the IRS will tell you for free?

Yes, it works with all the major tax software programs! The service isn't tied to any specific platform - it analyzes your documents and provides guidance on how to properly report items regardless of which software you're using. For your whistleblower settlement, it would definitely help since those have special reporting requirements too. Free IRS guidance is great but getting through to someone who understands these specific situations can take weeks. When I called, I waited over 2 hours only to be told they couldn't advise on my specific situation. The service saved me time and gave me documentation to support my filing position if questioned later.

How exactly does this work? Do they just call the IRS for you? I'm confused why I would need a service for that.

This sounds too good to be true. The IRS wait times are legendary. I seriously doubt any service can get you through that quickly unless they're doing something sketchy.

They don't call the IRS for you. What they do is hold your place in line and then call you when they're about to connect with an IRS agent. It's basically like having someone wait on hold for you. When your turn comes up, you get a call, and then you're connected directly with the IRS agent. There's nothing sketchy about it - they're just using technology to monitor hold times and manage the waiting process. It's completely legitimate and they can't access any of your tax information since you're the one who actually speaks with the IRS agent directly. I was skeptical too until I tried it, but it saved me hours of hold music and frustration.

I'm using H&R Block software. I've been looking for an override option but it's not obvious where to find it. Has anyone done this specifically in H&R Block?

In H&R Block software, you need to: 1. Go to the Income section 2. Find where you entered the 1099-NEC 3. Look for the small link or button that says "Edit" or "More Options" 4. There should be a question asking if this is business income 5. Select "No" and it should give you options for other types of income 6. Choose "Other Income" or "Settlements" if available If you can't find that option, sometimes you have to delete the 1099-NEC entry entirely and then manually enter the amount on Schedule 1 under Other Income. Just make sure you still document that you received the 1099-NEC in your tax file notes.

Yes, that's correct. Settlements for physical injuries are generally not taxable (excluding punitive damages). However, settlements for emotional distress WITHOUT physical injury are typically taxable. The IRS views emotional distress as taxable even if it resulted in physical symptoms (like headaches or stomach issues). Only settlements specifically for physical injuries or physical sickness are tax-free. If your settlement was purely for emotional distress from workplace discrimination with no physical injury component, it would be taxable income that should be reported on Schedule 1 (not as self-employment income).

I've worked with several clients who reported 1099-NEC settlements correctly on Schedule 1 instead of Schedule C, and none have been audited specifically for this issue. The key is documentation - keep your settlement agreement and a brief explanation of why you're reporting it differently than the form indicates. Remember, the IRS computer systems will notice the discrepancy (1099-NEC reported but not on Schedule C), but having proper documentation ready is your best defense. It's actually riskier to incorrectly pay self-employment tax on settlement income than to properly report it as other income.