This sounds like IRS Notice 2014-7 excludable difficulty of care payments.
In TurboTax Online, report 'difficulty of care' income on form 1040 line 1d as a positive number and line 8 as a negative number. This gives you credit for earned income yet reduces your taxable income and explains why the income is not taxable.
- Go to Federal / Wages & Income / Less Common Income / Miscellaneous Income 1099-A, 1099-C / Other income not already reported on a Form W-2 or Form 1099.
- At the screen Other Wages Received, select Yes.
- At the screen Certain nontaxable Medicaid waiver payments not reported on Form W-2 or 1099, enter the income amount.
- Click Continue.
- At the screen Any Other Earned Income and select No under Did you earn any other wages?.
The income is reported on line 1d of the Federal 1040 and backed out on line 8s of Federal 1040 Schedule 1.
Be advise that you may be able to use this nontaxable income to qualify for the Earned Income Credit.
See also this TurboTax Help.
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