Thanks for the answer. I don't think it will help with the second portion, that the income is not subject to further FICA or Medicare withholding (IRC Section 3121(v). The best I have figured out is to manually enter the taxable amount on Schedule 1, line (8z) and then include a statement of explanation both as to how the taxable/non-taxable amount was determined and make clear that the payments are not subject to further withholding under FICA and Medicare. Unless there are recent changes, it appears that means I will not be able to file electronically, as TurboTax does not allow the filing of any explanatory statements with a tax return that is filed electronically. Instead I will have to print it out, add the statement and file by mail. If anyone knows another way, I would appreciate the information.
