You are on the right track but to really know, we would need to know more about the circumstances. You would also have to report the income if you took a deductible loss at some point (like a theft and casualty loss).
For example, if someone fraudulently accessed your account and stole $5,000 and the bank reimbursed you (after suing them), that's not taxable unless you previously took the theft as a deductible loss. (In that case you have to follow the tax benefit rule to see how much might be taxable.)
Another example, some military taxpayers are getting rebates of mortgage interest when the lender overcharged them under certain laws protecting military homeowners. The interest rebate is not taxable income per se, but if they previously deducted the mortgage interest as an itemized deduction, then some or all of the rebate may be a taxable recovery (reimbursement of a previous deduction.)
Now, if you determine the money is not taxable at all, the IRS recommended procedure is to leave the income off your return. File by mail, not electronically. Attach a copy of the 1099 and a written explanation of why you did not include it in your taxable income. Don't attach other documents proving your case, but keep them handy in case you are questioned. There is a procedure to e-file with the 1099-MISC as well by creating a negative adjustment, but that will probably guarantee that you get a nastygram from the IRS.
