Q. If I choose not to enter the 10999-Q, am I still required to enter the 1098-T?
A. No.
The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T.
If you claim the tuition credit, you do need to report that you got one.
Note, in the long winded explanation, above, that it is possible to claim a generous tuition credit (over $2000, based on your numbers) by paying a little tax on a portion of the 529 distribution earnings (box 2 of the 1099-Q). The 10% penalty is waived in that situation.
