Please help. I entered W2, I owe IRS $900. I received 1099NEC from my lawyer because I won a 40k settlement. When I entered $40k, the amount I owe IRS jumped to $10k!!

Legal settlements are often taxed. It depends on the type of settlement and would have been mentioned in your settlement agreement. Generally, physical injury settlements aren't taxable unless you deducted medical expenses from the injury on a previous tax return. Non-injury settlements are considered other taxable income. You should receive a Form 1099 if your settlement is taxable. You will be taxed on the income based on the tax bracket that you fall in and the federal income tax rates. 

Please see the TurboTax article Are legal settlements taxable? for more information.

If you find that you have a balance due, there are several options when you have a tax bill that you don't have the money to pay.  Refer to the following articles: How to Pay Taxes: 10 Ways to Pay Your Tax Bill, Unable to Pay Your Tax Bill? Here’s What To Do, and the IRS article What if I can’t pay my taxes?

Where does the 40,000 show up on your tax return?  Did you get a schedule C for it?   Schedule C would be wrong and give you self employment tax.  Check 1040 and see if you have Other Taxes on line 23 like around $5,650.