Q. When I try to enter the 1098-Q under his tax, the Box 2 of 1098-Q is counted under his income and he has to pay tax. Why is it ?
A. You haven't entered any expenses to off set the Box 1 amount. When the box 1 amount is NOT covered by expenses, all or part of the box 2 amount is taxable (not the box 1 amount).
Q. I didn't enter the 1098-T on his tax since someone said he's dependent and it should go to the parent's tax.
A. It goes to the parent's tax, so they can claim the tuition credit. It can ALSO go on the student's return to offset the 529 distribution. But, beware, you cannot use the same expenses to claim the 1099-Q offset, that you used to claim the credit. Simple example: there was $10K in box 1 of the 1098-T. The parent used $4K to claim the credit. The student can only use $6K of the box 1 amount (the program will theoretically handle this). But, he can also use room and board, books and a computer. You should reach a screen asking How much was used to claim the credit. Be sure the amount in the box is $4K.
But, again, if you KNOW none of it is taxable, don't enter either the 1099-Q or 1098-T, on the student's return. It's complicated and mistakes are frequent.
