It takes a workaround. Do not enter under income. Instead, in TurboTax (TT), enter at:
Federal Taxes Tab (Personal for H&B version)
-Deductions & Credits
-Scroll down to:
--Education
--ESA and 529 Qualified Tuition Programs (1099-Q)
When asked who is the student, check "someone not listed here" (even if she is still your dependent). 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.
Check that she attended college in 2023 (Lying to TurboTax to get it to do what you want does not constitute lying to the IRS).
Enter your expenses, covered by scholarships, over the years (and not previously used to claim other tax breaks).
Re-enter the total in the box "Tax-free assistance" under adjustments (the scholarships amount).
TT will prepare form 5329 to claim the penalty exception.
With this workaround, You do not have to deal with the complicated “Educational expenses and Scholarships” (1098-T) section later. You get one simple screen to enter everything.
I have not addressed the issue of whether you are allowed to claim the scholarship exception, this late. The consensus is that you are not. But, it's not unanimous. Here's one reference that says you are allowed to: https://www.forbes.com/sites/josephhurley/2016/02/04/dont-make-these-mistakes-when-reporting-529-pla...
