Q. Does my daughter need to file a separate return if I enter all her 1099-Q and 1098-T in my return as I am taking her as a dependent child in my return?
A. No.
Q. If I am not entering it on my return, does my daughter still have to file her own return separately as well?
A. No.
If the 1099-Q needed to be entered (and it doesn't), it would go on her return, not yours, because she is the "recipient" ( Distributions from her 529 plan have always been paid in her name).
The 1099-Q and the 1098-T are only informational documents. The numbers on them are not required to be entered onto your (or your student's) tax return.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records.
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income. Since you know neither of those are true, do not enter it on either return.
The question you didn't ask is can the student claim the tuition credit, on her return? The answer is no. If sometime in the future, she has enough income to have a tax liability, then maybe. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit.
