My son had 2022 scholarship funds in excess (by $9000) of his qualified expenses. He also had $2600 in earned income. These were reported on 1040 Line 8 (transferred from Schedule 1, Line 8r) and 1040 Line 1, of his return, respectively. His return indicates that he can be claimed as a dependent on another's return (mine).
The correct deduction (1040 Line 12) should be $2600 + $400 = $3000. Instead, TurboTax incorrectly calculated the deduction as $9000 + $2600 + $400 = $12,000. (Tax is owed on the unearned excess scholarship, but that amount does not figure into determination of the deduction in the way earned income does.)
I didn't catch that in real-time, but the IRS sent a nice note with an offer for us to pay the 10% tax (plus penalty and interest) on the $9000, and call it even.
