Get your taxes done using TurboTax

Yes there is a way to report it and then remove it from your income. Since the money received was actually a reimbursement to repair the damage caused, and assuming this amount is not greater than the cost of you actually paid for your your car then it should not be taxed.

When you are signed into your TurboTax Account use the following steps to enter the income:

1. Click on Federal > Wages & Income.
2. Scroll down to the Other Common Income section. 
3. Click on the Start/Revisit box next Form 1099-MISC. 
4. On the screen Did you get a 1099-MISC?  click on the Yes button.
5. On the next screen, Let's get the info from your 1099-MISC, enter the information from the 1099-MISC.

Once you have entered the income you can use the following steps to enter it as a negative figure which will result in zero income being added to your other income.

1. Click on Federal > Wages & Income.
2. Scroll down to Less Common Income section.
3. Click on Start/Revisit box next to Miscellaneous Income.
4. Scroll to Other Reportable Income Click Start/Revisit.
5. Enter Description and negative amount (ex. -500).
6. See the image below for assistance.