@feiwenw66563 OK. This is real easy.
Do not enter the 1099-Q, at all. You just risk making errors and it coming out wrong. You only had a $20K distribution and the $40K in box 1 of the 1098-T is the only documentation you need in case of an (unlikely) IRS inquiry.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board to cover the distribution. 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.
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."
Your son enters the 1098-T on his return. He doesn't need to bother entering any other numbers (or adjust the 1098-T), as TurboTax(TT) will only use $4000 of expenses to claim the maximum credit. If it makes you feel better, you can change the box 1 amount to 20,000 (the original 40K less the 20K allotted to the 1099-Q). In the personal info section of TT, be sure he answers yes to the question about more than half his support coming from earned income. That is needed to get the refundable portion of the American Opportunity Credit.
PS. Only the $600 in box 2 of the 1099-Q was ever at risk of being taxed, if there hadn't been sufficient education expenses
