@Montyab
If you know, after using $4000 for the credit, that you still have enough expenses to cover box 1 of the 1099-Q, just don't enter the 1099-Q.
The interview is complicated and mistakes will be made.
When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
