You need to report the income subject to the treaty on your tax return and then enter an adjustment to remove it. That way you can explain why the income isn't taxable.
If you haven't entered the income elsewhere on your return, enter it in the Foreign Earned Income and Exclusion section that you will find under Less Common Income in the Wages and Income section of TurboTax. On the screen that asks What Form(s) Was Foreign Income Reported on? answer A Statement from my foreign employer. You will be asked if you want to try to exclude the income, to which you should answer "no". You will be asked if you want to delete form 2555, to which you will answer "yes".
The income will appear on your form 1040, line 1(h) as other earned income. To remove the income since it is not taxable, make an adjusting entry for the amount of it as a negative entry to Other Income.
You can make that adjusting entry in TurboTax as follows:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the treaty and the adjustment as a negative number
You must complete Form 8833 Treaty-Based return position disclosure and include with your return. That form is not available in TurboTax, so you will need to complete that separately and attach it to your tax return that you would mail in. Here is a link to the form: Treaty income adjustment
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