Deductions & credits

BEFORE ANYTHING, MAKE SURE YOU ARE NOT THE BENEFICIARY of the account. I think you might be the owner, but not the beneficiary. The beneficiary must be the student or you'll be taxed and pay a penalty on the distribution.

Make sure the beneficiary is the student, not you, her dad. You might be the owner of the account, and you may have been issued the 1099-Q, but the beneficiary should be your daughter. If you are entering the 1099-Q and saying you are the beneficiary, you'll be taxed. 

You can only use this work-around if the beneficiary is your daughter, the student. 

I suggest you simply correct the entry of the 1099-Q if you selected yourself as the beneficiary, and you're not. That might be all you need to do. 

If that doesn't take care of it and you just want to subtract the distributions from the tuition (AND your daughter IS the beneficiary), delete the 1099-Q, the 1098-T and re-enter the 1098-T. The screen after entering the 1098-T asks for additional tax free assistance. Enter the amount of the distribution here.   

I understand, it is so hard to get back to the 1098-T screen. I suggest you delete the education info, (you have to go through all the interview questions, then delete the student) or delete the 1098-T and start over. Before you start over, make sure there is nothing showing in the education section under "Deductions & Credits. Delete form 1099-Q first if you have already entered that. 

To delete the 1099-Q and 1098-T follow these steps: 

Sign into your account and go into the return

Open the “Tax Tools” drop-down on the left side bar

Click on “Tools” on that drop-down

Click Delete a form (the third one down) on the “Tools Center” screen

Scroll down and click “Delete” next to Form the form.

Enter it over again, after you enter the 1098-T, the next screen should ask about additional assistance. You can enter the amount of the distribution here, but don't enter the 1099-Q. Keep the copy with your tax file. Again, verify that the student is the beneficiary.