Technically, you are required to enter the income. Also, you need to complete form 8833 to have the income exempt from tax by citing the treaty.
You would enter the income in the Less Common Income section of TurboTax, then Foreign Earned Income and Exclusion.
After you enter the income, you would enter a negative amount as Other Income to cancel it out as follows:
- Income and expenses
- Less common income
- Miscellaneous income, 1099-A, 1099-C
- Other reportable income
- Enter a description of the treaty and the amount as a negative number
So, you will enter the income and then cancel it out with a negative entry.
You should complete and attach form 8833 to your return, which you must mail it, to disclose the treaty. This form is not available in TurboTax, but you can complete it online by using this link:
Form 8833 (Rev. November 2020) (irs.gov)
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