So you are doing the calculation to confirm this in the program, which means you enter the 1099-Q and the 1098-T into the program. Yes, the program should take your qualified distribution out of its calculations but it does not. Instead it calculates a tax on the distribution not taking the 1098-T into consideration. You have to manually remove the 1099-Q in order to get the correct tax calculation in program. Most people using the software do not know this and the program does not explain it. The program tells you to enter the 1099-Q for the dependent and so does the IRS guidance on 1099-Qs. Once the calculation is done and it shows all the distribution is qualified it should show zero added tax, but it does not.
