The program is taking 4,000 for an education credit.
The credit may be worth more than the tax on the distribution.
I would also point out that the 1099-Q can be used to pay for Room and Board, which would make the distribution tax-free (NOT the same is true for scholarships)
You can use Room and Board expenses even if the student lived at home (cannot be more than what the cost would be for on-campus housing)
When you click "Maximize My Tax break", the program decides if you should claim income in order to also claim a credit.
You can type
letme
into the search-box and it will link you to where you can see and change your options
Pub 970
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