You do need to submit the form 8833 but TurboTax does not support that form. You will have to complete it online and mail your return in with a copy of it. Here is a link to the form including instructions:
https://www.irs.gov/forms-pubs/about-form-8833
You don't need to submit any forms to her employer.
Use these menu tabs to report the $5,000 exemption from tax on your tax return:
- 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.
The instructions to Maryland taxes does not address the issue of the treaty you cite, so you need to call them to find out if it is exempt at 1-800-638-2937.
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