We ran into this exact same problem with Turbotax yesterday! My daughter's college already reduced the educational expenses paid (Box 1 on the 1098T) by the amount of her scholarship (Box 5). Our tax liability drastically increased because of this issue. A number of experts on line have stated that if the distributions were 100% used for qualified educational expenses, you don't have to report anything on your tax return. You can just leave it off. That's what we are going to do. Many of our friends have said the same thing. I really think Turbotax needs to ask this question in their program before having you enter the information from the 1099Q and the 1098T!
