Q. How do I enter all this in TurboTax?
A. Enter the 1099-Q. When asked who the student is answer: someone else not listed here. Enter the student's name when asked. A few screens later, you'll get one simple screen to enter expenses. Press Done at the 1099-Q summary screen, to get there. Enter tuition, room & board, books and supplies. Also enter $18,800 in the box "Tax-free assistance" (because $10,000 was covered by scholarship and $8800 was used by her to claim the LLC credit). This reports some of the earnings as taxable and claims the scholarship/tuition credit exception. You do not have to deal with the complicated “Educational expenses and Scholarships” (1098-T) section later. TT will prepare form 5329 to claim the penalty exception.
