1. Cook the turkey bacon in a Dutch oven or large pot over medium heat, flipping halfway, until browned and crisp, about 8 to 10 minutes. Transfer turkey bacon to a paper towel-lined plate.
2. Add the chopped onion to the turkey bacon fat in the pot. Cook, stirring occasionally, until softened, about 5 minutes.
3. Increase heat to high. Add chicken broth and scrape up any browned bits from the bottom.
4. Stir in the milk, kosher salt, and black pepper. Bring to a boil.
5. Add the potatoes. Reduce heat and simmer, stirring occasionally, until potatoes are tender, about 8 to 10 minutes.
6. Crumble the turkey bacon into small pieces while the potatoes cook.
7. Turn off the heat. For a smooth soup, purée in batches in a blender or use an immersion blender. For a chunky texture, mash some of the potatoes with a masher.
8. Return soup to low heat. Stir in shredded cheddar cheese until melted.
9. Turn off the heat. Stir in sour cream. Taste and season with more salt and pepper as needed.
10. Serve hot, garnished with crumbled turkey bacon, more cheddar, and chives or scallions.