Let's start at the beginning and work through this. The 1099-Q is first. $7,717, all qualified, should not be entered into the program. IRS Publication 970, Tax Benefits for Education states:
If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.
Let's move on to the 1098-T. Box 1 $14842 box 5 $6323. Box 1 is bigger than box 5, there is no taxable income and plenty of money left for you to take the full education credits on your return.
Some answer was incorrectly marked along the way for the program to come up with the taxable income.
The IRS also realizes how hard it is to get the moving parts right and has a great brochure that explains how scholarships and tax credits interact.
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