@JKCPA said "There is another 1099-Q with child B on it and it is in state (box 5) checked."
You're OK. That sounds like Child B already had his own plan. That wasn't clear at first.
If the remaining $4000, from child A's plan was not used for Child A's education, including room and board, that part is a non-qualified distribution. Using it for Child B's education does not change that.
20% (4000 / 20,000) of the box 2 amount is taxable (not the full $4000) and subject to the 10% penalty.
