I have a 529 plan for my Granddaughter.  I had $4000 sent directly from the plan to her college for the first semester in 2021.

Her 1098-T showed $4570 tuition and $2125 in scholarships (I Reported the1098-T on her parent's return)

Her 1099-Q (I reported on her return) shows the Distribution of $4000 and Earnings of $1600 

Software is saying she owes tax on the "excess withdrawal"

Want your opinions on whether I've reported this right and if I'm missing something.