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Edit: Youcould also try al this without the xbox controller, just that my headset only showed up in both the communication and playback areas when connected with the controller. Also, what headset do you use?
#2 disable all other other input and non-needed outputs in device manager
#3 right click on sound icon bottom right >open sound settings > manage sound devices > insure all non-needed devices are disabled
#4 In steam click friends > settings > voice > click on used devices for voice chat (not-auto)
#5 uninstall squad
#6 install squad
#7 launch game
***#8 do not allow to steam to make changes to device ***
#9 allow anti cheat
But try those two first, set your microphone of choice as default device and then as default communications device.
Then start the game and check if it works. If not, it's most likely some Windows 10 setting overriding it - do some Google-fu and you should be able to find relevant settings.
If you want to access the old Windows 7 sound manager which Microsoft decided to make an utter pain in the rear to access in Windows 10 - simply press the windows key and type in mmsys.cpl