Where in TT can you specify that an unqualified education withdrawl is not subject to tax because of a scholarship?

[skil]

In 2021, my 529 was overfunded so I elected to withdraw $17,000 as an unqualfied withdrawl.  But, this amount, while subject to tax, is not subject to penalty because my son received a tax-free scholarship from his school for $17,000.  I'd like to know WHERE in the TT interview I can specify this fact so TT will tax but NOT assess a penalty?  In the meantime, I went into forms and adjusted my 1099-Q manually in the "Distributions Not Subject to Additional 10% Tax" by updating box 2c (Included in income because beneficiary received tax free scholarship) with the full amount of my taxable income.  By doing this, the form correctly updated my taxable income on line 7 in the "QTP Computation of Taxable Distribution" and removed the penalty.  So, can anyone tell me where I enter the scholarship info in TT - I could not find it during the entry of the 1099-Q?

An additional problem I encountered is, even though I adjusted as described above, my new correct taxable amount on line 7 FAILED to carryover to the OTHER INCOME worksheet, line 4a.  I had to override line 4a on that sheet to match line 7 as described above.

[Hal_Al]

Q. Can anyone tell me where I enter the scholarship info in TT - I could not find it during the entry of the 1099-Q?

A.  You enter the expenses and scholarship info later, at the educational expenses portion of TurboTax.  When TT sees the scholarship, it will automatically generate form 5329 to claim the penalty exception. 

[skil]

Thanks, Champ.  When I went into TT to try what you said, it did an update.  After I restarted, I went into the expense portion as you mention. I remember already completing this section, so I went through it again. I changed nothing. But, I did notice that the 1099-Q is now correct.  Line 2c in the "Distributions Not Subject to Additional 10%" corrected.  Unfortunately, I still have to override 2c in the QTP Computation section since TT is still reducing my qualified expenses by 10K even though I don't get this deduction elsewhere  (TT really needs to fix that). 

Thanks for the help!

[Hal_Al]

 @skil  said "Unfortunately, I still have to override 2c in the QTP Computation section since TT is still reducing my qualified expenses by 10K even though I don't get this deduction elsewhere"  

TurboTax assumes you want to apply $10,000 of expense for the Lifetime Learning Credit (LLC). 

Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary".  Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it.  You may reach that screen sooner.