1099-Misc code 7 and EIC

[Tax Prep by Deb]

OK, I have a question here.  I have a client who received a 1099 Misc with code 7 non employee compensation.  This was a settlement that was reached between my client and her former employer due to not being given lunch and breaks through out the day.  Because she was not in business I went ahead and entered the 1099 Misc and had it go straight to the 1040 line 21 subject to se tax.  When I do this however it does not show up as earned income for purpose of the earned income credit.  If I take it and send it to schedule C it does.  What is the correct way to handle this?

[Jack from Ohio]

Schedule C, or C-EZ.  The IRS will be looking for that amount on one of those two forms.  Otherwise, client will get a CP2000.  

I have personal experience in this exact same scenario.

Use C-EZ and business code 999999.

[Tax Prep by Deb]

Turned out that the problem was not with the EIC but the child tax credit.  Any how I just moved everything to Schedule C-EZ and problem solved.