Q. I am guessing she doesn't need to file a tax return for her 1098-T now as the Earnings is accounted for by her Room & Board expense. is that correct ?
A. No.
You do not compare her $10,800 room & board (R&B) expense to the $7950 earnings in box 2 of the 1099-Q. You compare her R&B to the full distribution shown in box 1 of the 1099-Q. Box 1 must be equal to or less than $10,800 for the distribution to be tax free (or you need to allocate some other expenses (tuition, books, a computer) to the 1099-Q.
