Q. Should I use the $17,875 as the component that was withdrawn due to scholarship?
A. Yes.
Q. Can I include scholarships from prior tax years?
A. Technically, No. That said, see https://ttlc.intuit.com/community/college-education/discussion/529-plan-withdrawals-and-prior-year-s....
Q. Either way, how do I enter this in TurboTax? I've seen the workaround based on listing the 1099-Q student as "someone else not listed here"
A. That's still the best way because of the simplicity.
The workaround is: when asked who is the student, check "someone else not listed here" (Lying to TurboTax to get it to do what you want does not constitute lying to the IRS). On the next screen, enter the real student's name. This will eventually give you one simple screen to enter all expenses. Press Done at the 1099-Q summary screen, to get there.
After entering your expenses, enter the total expenses (or the scholarship amount, if less) in the box “Tax Free Assistance”. This reports the earnings as taxable and claims the scholarship exception. TurboTax will prepare form 5329 to claim the scholarship penalty exception.
