If this money is tax exempt why is my initial returned lowered when I put this amount in? Do I have to put this income in if it’s tax exempt? And I have a letter from my employer?
You may be referring to the Difficulty of Care Income Exclusion. If you qualified, your medical care income would be excluded from federal income tax. If so, your income should have been reported on a W-2 from, not a Form 1099-NEC. If you determined that the income reported on a Form 1099-NEC was not taxable, you would need to enter it as other income and then enter a negative adjustment to income to cancel it out. Here is a link to information on the income exclusion: Difficulty of Care Income Exclusion
This is how you would enter the adjustment to income in TurboTax:
You can make that adjusting entry in TurboTax as follows:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the entry and the adjustment as a negative number