I can tell you how the IRS has handled this on a client I have. Exact situation you described. Box checked that distribution went to someone other than the beneficiary. All moneys paid to the school.
We followed guidance in IRS publications that said to leave the distribution off the 1040 if sufficient Adjusted Qualified Educational Expenses [AQEE] to offset the §529 plan distributions. Taxpayer subsequently received an IRS notice assessing tax on the entire §529 distributions. The box being checked has created numerous problems. For purposes of §529 plan distributions, room and board is included in AQEE. It’s been a nightmare trying to fix this in the “new improved IRS”.
