If a person has an interest income of $5,826 but paid an early withdrawal penalty of $947, should this be subtracted from total income for the question on gross income?

Yes. When you enter the interest income on Form 1099-INT, check the box: 'My form has info in more than one box 1'. Then enter the penalty in box 2.

The amount transfers to Form 1040, Schedule 1, Line 18 as adjustment to income.