@Bob-K3 The maximum tax on $463 of earnings, on the 1099-Q, is about $70 for someone eligible for the LLC. Yours will be even less. The LLC is worth as much $2000, for someone with $10,000 (or more) in box 1 of the 1098-T.
You want to claim the LLC even if you have to pay a little tax (less than $70) on the 529 distribution. So, you won't be able to use a workaround. You do want to enter the 1099-Q. Do not ignore it.
If you been having trouble getting it to work, Delete the 1099-Q and the 1098-T and start over. Enter the 1099-Q first. Later enter the 1098-T and your books and board amount. In the education interview, you should reach a screen titled "Choosing a larger education Credit". Verify that TT has entered $10,000 (the amount needed to get the maximum LLC) in the box on that page (you can change it, if needed).
The result should be:
-You get the maximum LLC. It may be less than $2000 if your tax liability is reduced to 0.
-About $350-$450 (depending on how much "board" you enter*) of 1099-Q income will go on line 8z of Schedule 1, as taxable income
-Form 5329 will be generated to claim the penalty exception on the 529 distribution (claiming a tuition credit is a penalty exception).
*For a 529 distribution, for off campus "board", you may use your actual food costs or the school's allowance for cost of attendance (essentially the meal plan cost), whichever is less.
