If the Form 1099-MISC is reported to your Social Security number, then the IRS will expect to see that income reported on your return and included as part of your taxable income. 

Use the following steps to enter the information from your 1099-MISC about the royalty so that it is included on your return in the Rental Properties and Royalties section of TurboTax (note:  you may be asked to upgrade to a higher version of TurboTax to include the correct forms needed to report the royalty):

• On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)

• This opens a box where you can type in “royalties” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)

• The search results will give you an option to “Jump to royalties”

• Click on the blue “Jump to royalties” link

Skip the first question or so because they will pertain to rental properties and not royalties.  You will come to a screen titled, “Is This a Rental Property or Royalty?” where you can choose Royalty.  You will need to enter a short description for the type of royalty and include an address for the royalty.  Use your own address if the royalty is not associated with an actual property address (such as with a property lease or mineral rights).  Continue moving forward until you get to a summary page for the royalty.  Here you can select Start or Update beside Royalty Income to enter the income amount and the other information on the 1099-MISC.