Education

 Sorry to come late to the party but if:

 $56,404  Tuition expenses

 - 28,500  Paid by Scholarship

= 27,904   Expenses that can be used for the 1099-Q

$28,500   1099-Q (529 Withdrawal)

-  27,904    Expenses

     $ 596   of the distribution in non qualified

Why not 

  $56,404  Tuition expenses

  - 28,500  1099-Q (529 Withdrawal)

= 27,904   Expenses that can be used for the Scholarship

 $28,500   Paid by Scholarship

-  27,904    Expenses that can be used for the Scholarship

      $ 596   of taxable scholarship

Just have the student claim 596 scholarship income, will that make any difference on her return? And Form 5329 is not needed. 

The student can enter that in the Education Section as Scholarship received. 

You do need to go through screens that will say she is not eligible for credits that way  

OR  

Sign into TurboTax and continue through until you can start selecting "Wages & Income" located at the top of the screen

Click on Wages & Income

(If the program asks about your W2, select Skip for now )

Select answers to the following questions if necessary to move forward

Click Add more income

Scroll down to the VERY LAST option "Less Common Income" and click Show more

On this new drop-down list scroll down to the VERY LAST option "Miscellaneous Income" and click START

On this new drop-down list scroll to the VERY FIRST option "Other income not already reported on a Form W-2 or Form 1099"

Click START

Select YES to the page titled "Other Wages Received" and Continue

Select CONTINUE on the "Wages earned as a Household Employee" screen (enter nothing here)

Select CONTINUE on the "Sick or Disability Pay" screen (enter nothing here)

Select "Yes" on the "Any Other Earned Income" screen and continue

Select "Other" on the "Enter Source of Other Earned Income" and Continue

In Description Box type "SCH" and 529

Click Done

This will put the income on the 1040 line 1 where it needs to be.