@Hal_Al - Thank you very much for such a detailed answer - very helpful! I've actually talked to a couple of knowledgeable CPAs and both had not idea what I was asking and said they needed to research the question around scholarship and penalty free with withdrawals. One of them told me I'd have to enter my 1099-Q under her return which makes no sense whatsoever.
Before I go any further, let me make sure I understand correctly. When you said "your must enter the 1098-T at the educational expenses section", I assume you mean entering her 1098-T (obviously it is issued under her name) into my tax return? Feels a bit weird entering her form under my return, or is that normal?
Also (rounding these numbers for simplicity), on her 1098-T, box 1 amount is $27,000, box 5 amount is $19,000, and the 529K withdrawal I made was $20,000. Does that mean I will still be penalized on the excess $1,000 withdrawal? Obviously, not a big deal, just want to know for the following years.
Just an fyi - I've created a separate TT account for her, entered her 1098-T, and the tax due amount came out as 0 (she has no income outside of this scholarship). I assume that means she does not have to file a return on her own?
Thanks again!!
