In my specific situation, on 1098-T, Box 1 (Payments received) =$7805, Box 5 (Scholarships) = $3000.
We paid $4000 from personal savings (to take advantage of the American Opportunity Tax Credit).
We paid $400 dollars from 529 plan. On the 1099-Q, Box 1 (Gross distribution) = $400, Box 2 (Earnings) = $55 and Box 3 (Basis) = $345.
We entered the information with assistance from 2 people from TurboTax call center watching online. They confirmed everything was entered correctly, yet the TT tax return showed $55 in income on line 8. It was not (and still isn't) clear why TT would have included that as taxable.
The Call Center people (who were very polite and professional) said I would have to pay for tax advice option to get an answer. When I asked if I would get a refund if it turned out to be a TT issue, they clearly state that I would not.
Later, I reached out to some parents (locally) and one of them was able to show we a way to address this.
I still think there is a bug in TT for my specific situation. I was surprised and disappointed that the TT call center person didn't seem to be concerned by that.
