which will work best can't say but the problem with manual attachments is what is done with them once the IRS gets the return. your problem with entering just the taxable portion on the tax return is that the amount will not match with the IRS records. their computer might automatically generate a mismatch notice and a bill for the difference. can't say for sure. neither can I guarantee my method will work but at least the IRS will be able to match the amount on your return to the amount on the 1099. I see no way to enter a description on the 1099 that carries to schedule 1.
who gets the nontaxable portion is irrelevant.
it's your return and you should do what you feel is best. the worse that can happen is that you get a bill from the IRS which you can refute by supplying adequate documentation
