Yes, since this was a refund to you and not a legal settlement, you would include the 1099 in income and then offset it on line 26 of Schedule 1 as an adjustment.
To do this in TurboTax you will select the following (note your navigation may be slightly different due to differences in user experiences)
- Federal
- Wages and Income
- I'll choose what I work on
- Less Common Income
- Miscellaneous Income
- Other Reportable Income
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