Nonqualified scholarship

You are correct that you do need to pay income taxes on this "non-qualified scholarship and fellowship" income, as reported to you on the letter you received.

However, although you must pay ordinary income taxes on this income, you do not have to pay Social Security and Medicare taxes on it as well, as you would if this were instead true self-employment income.  Please allow us to explain that, and also direct you to the correct data entry area of the program.

Academic institutions, research facilities, and certain government agencies will often report fellowship income in various or nonstandard ways, especially at the graduate and postdoctoral levels.  It's certainly not an uncommon occurrence; but yes, the income you received is definitely considered taxable compensation.  As such, you do (legally) need to declare it and report the information on your income tax return.

This can be accomplished in the TurboTax program, both in the online (web-based) software as well as in the desktop versions of the program.  In fact, fellowships, grants, non-qualified scholarships, and stipends are all taxed in the same manner.

The mechanical steps to do so are outlined at the following AnswerXchange post from a few years ago.  Ignore the fact that the income was shown on a letter, and instead follow the steps outlined here:

https://ttlc.intuit.com/questions/2638576-how-to-report-a-fellowship-stipend

Those general processes remain accurate for the current (2016) tax year of the TurboTax program (i.e., either of those described will work just the same).

Both as a test of this, and as demonstrable proof for this answer, I ran a (hypothetical) academic fellowship of $3,000 through the federal tax program.  In fact, I did it in both of the ways described on that other post, and the results came out just as expected, without any errors present.  (Please see the attached screen-capture image for a visual aid; simply click to open.)  As desired, the notation "SCH" appeared on Line 7 of Form 1040, and the $3,000 test amount was added to taxable wages.

I have full confidence that this method will work for your tax return, too.  Just substitute the actual income total you have for the $3,000 used in the demonstration example.  The good news is that, as we noted above, while your fellowship income is taxable as ordinary income, at least you do not have to pay Social Security and Medicare taxes on it, as you would if the income were alternatively taxed as ordinary W-2 wages, or as self-employment income.

Thank you for asking this important question.