I received a settlement from my former employer for unpaid wages. In addition to the unpaid wages, the settlement also included attorney's fees and statutory damages. (The settlement agreement clearly notes which amounts are which.)
The employer reported the total amount of the settlement in box 7 (nonemployee compensation) of 1099-MISC, which makes the amount subject to self-employment tax.
However, according to e.g. an IRS presentation on the Taxability and Reporting of Wage Settlements and Judgments, this is incorrect. The past wages should have been reported on Form W-2, and the attorney's fees and statutory damages should have been reported in box 3 (other income) of 1099-MISC. None of this should be subject to self-employment tax.
What should I do on my tax return to remedy the situation and avoid paying unnecessary self-employment tax?
(Note: Contacting the employer and asking them to correct this on their end is unlikely to be successful.)