Measure the height and depth on both sides of the window using a tape measure, and note the dimensions on a piece of paper. Use these measurements to draw two rectangles that will cover the sides and outer borders of the window using a pencil and ruler. Cut the rectangles out of the drywall using a circular saw.
Measure the depth and width of the top of the window using a tape measure. Use these measurements to draw two rectangles that will cover the top and outer edge of the window using a pencil and ruler. Cut the rectangles out using a circular saw. The bottom of the window does not require measurement, as the windowsill alleviates the need for a drywall return.
Hold the first side panel against the side of the window. Screw the drywall to the side of the window through studs in the wall using 2-inch drywall screws and a hammer drill. Use one drywall screw in each corner and another screw every 3 inches between the corner screws. Repeat for the other side panel and the top panel.
Mix up a batch of jointing compound according to the manufacturer's instructions. Fill the gaps between the drywall sheets with the jointing compound using a grouting tool. Measure and cut strips of jointing tape the length of the joints between the drywall sheets. Press the jointing tape into the jointing compound. Cover the jointing tape with more jointing compound. Allow to dry, then sand the surface down to a smooth finish. Decorate as desired.