I came across this Tax Adviser article.  Please click on the link and go to the section, "Tax treatment of indemnity payments" and read the entire section.  It may not be right on point for you, but I think you'll find it useful.

My read is that the IRS and the Tax Court have different views on the taxability of the tax preparer indemnity payment.  The IRS believes the amount is generally taxable.

My suggestion is for you to hire a trusted CPA to prepare your tax return.  If the CPA doesn't believe the indemnity payment to be taxable, disclosure it in your tax return.

I had written a much more detailed reply, but Intuit rejected it and I lost my reply.

https://www.thetaxadviser.com/issues/2017/jul/tax-preparer-mistakes-penalties-treatment-indemnity-pa...

Tax preparer mistakes: Taxpayer penalties and the tax treatment of indemnity payments

By Edward J. Schnee, CPA, Ph.D.