The Education Section is very complicated.
We can be of more assistance if you would like to provide more details, like
Are you the student filing independent?
Are you a Dependent Student (someone else is claiming you) ?
Are you the parent of a student that is your dependent?
What was the amount of education expenses ? (Form 1098-T)
What expenses did the distribution pay? (tuition or Room and Board?)
Who was the 1099-Q issued to ? (account owner or beneficiary)
Additionally, you might look to see if you are getting an education credit.
If you are, the program might be suggesting the distribution be taxed so that the credit may be claimed. This is allowed by the IRS and usually results in a larger refund.
If you want the 1099-Q to go towards education expenses, simply do not enter the 1099-Q, BUT ALSO adjust your expenses. For example, if the distribution paid Room and Board, just don't enter the 1099-Q and also do not enter the amount of expenses for Room and Board. On the other hand, if the distribution paid Tuition, adjust Box 1 on the 1098-T to reflect the lesser amount of tuition you can claim.
If you selected "Maximize My Tax Break" in the Education Section, type
letme
as one word in the Search-box and the program should show you your options on how to allocate the distribution and expenses and you may change the allocations if you so desire.
Forms 1098-T and 1099-Q are informational.
You enter them so that the TurboTax program can do the math. Problem is, there are several way the math can be applied.
If you don't want the program to make decisions on what to apply where, adjust what you enter, or adjust which credit you want the program to take (if any).
IRS Pub 970 shows some great examples and explains more on the subject in detail.
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