@Hal_Al - I'm still waiting for my daughter to work on her taxes with me. In the meantime, I have some follow-up questions. I admit the shortcut steps are a little confusing to me. Thanks for your patience.
That leaves $7000 R&B and $4100 tuition for her ($11,100 total expenses). $1250 (tuition) is allocated to the scholarship, leaving $9850 for her 1099-Q.
Q: We enter $9850 on her 1099-Q, not the full $14,500? And adjust the basis (box 3) and earnings (box 2) proportionally ? Full 1099-Q shows $5300 earnings... 5300/14500 = 36.55%... 36.55% * 9850 = $3600 (new earnings - box 2)? And $6250 for basis - box 3?
Again, I recommend a short cut*. Enter her 1099-Q on her return.
Q: Or does this mean we enter the full $14,500 on her 1099-Q? And the full $5300 for box 2 and $9200 box 3?
A few screens later, you'll get one simple screen to enter expenses ($8100 tuition & $7000 R&B).
Q: I entered $4000 expenses on my taxes for 1098-T so shouldn't she enter $4100 tuition on hers so as to not count the $4000 expense twice? I thought you said that, too ("That leaves $7000 R&B and $4100 tuition for her"). Or am I'm wrong because of this statement? => Also enter the $5250 (1250 + 4000) in the box "Tax-free assistance".
*TT can theoretically handle it if you enter the 1099-Q correctly and then later enter the expenses in the 1098-T section, with adjustments...
I might try this first to see if it works. Would that mean we enter the full $14,500 on her 1099-Q, then enter her 1098-T with $4100 tuition, $7000 R&B, and $1250 scholarship (4100+7000-1250=9850 expenses)? But I understand your comment that TT doesn't always do this correctly. Plus, that method seems to lead to an excess QTP distribution of $4650 ($14,500 - $9850) subject to penalty.
