Get your taxes done using TurboTax

Follow these steps:

1. Open your return
2. Select Forms mode
3. Locate 5329 in your list on the left of the screen
4. Scroll down to Part II
5. Enter the amount showing on line 5 from the 529 on line C

I am assuming you mean the waiver of the 10% penalty on Form 5329 which applies when a distribution becomes non-qualified because a scholarship covered the same expenses. The program should be seeing the Q and T and apply the exception code. 

The goal is for your tax return FORMS to be accurate. The 1098-T is an informational form, all the worksheets in the program are not tax forms and do not go to the IRS. The Form 5329 containing the penalty, is a form that goes to the IRS.

Reference: 529 Plans and Taxes