Don't do it; I think you are right. Don't download anything that you are unsure of and I have never heard of that Xcode. If you are using the Online software, you will not be asked to install anything from TurboTax. And if you are using desktop software, the actual software is the only thing that needs installing. Updates come from the TurboTax servers and are easy to identify.
As you said, it is probably some kind of malware. This discussion was the only thing I could find regarding the Xcode prompt. https://discussions.apple.com/thread/7206274