The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T.
If the 1098-T from W duplicates box 5 amounts from S, the simple thing to do is change it to the correct amount at the 1098-T screen. You will reach a screen that allows you to add other scholarship, but I don't believe it allows you to subtract any (you can't enter a negative number).
Even though you are claiming her as a dependent, and claiming the tuition credit (I assume), she can still file a tax return.
In TurboTax, she indicates that somebody else can claim her as a dependent, at the personal information section. TT will check that box on form 1040.
With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased.
To claim the $1000 as income, she enters a 1098-T from U. W. Leave box 1 blank and enter $1000 in box 5. This assumes the box 1 amounts on both 1098-Ts exceeds the box 5 amounts. Otherwise, he may have more scholarship income to report.
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This "aside" may not apply to you, but I provide it just in case.
There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.
Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
