This is a program bug in TurboTax, which could cost those with 529 Plans thousands of dollars. The IRS receives the information on the1099Q and, if there are no offsetting qualified education expenses (QEEs) shown in your return, they come asking for money. I know this, because I got a call from the IRS 2 years ago, having assumed I don't need to list the QEEs.
Hats off to Hal_Al to figuring out how to short-circuit TurboTax to get it to do the calculation correctly. However, this kind of (frankly confusing) workaround should not be necessary. Intuit, please fix your product! There are no income limits for using 529 Plan/1099Q Distributions for QEEs.
