Mom received 1099-Q with her name social security number on it.

Son has a 1098-T.  Mom claims son & education expenses on her return.

We have her in ProSeries Pro as the 'recipient' and son as the 'designated beneficiary" on the 1099-Q worksheet.

1098-T is linked to 1099-Q in Proseries Pro.

Education expense is $8800.   Earnings (box 2) on 1099-Q is $9050.    Mom is being taxed on total amount of earnings.   There is also a 10% penalty on only a portion of the earnings which is calculating correctly.  Why is she being taxed on total earnings earnings. This doesn't seem to be correct.

 The education expense of $8800. are not being used to offset the earnings however, it does calculate correctly for the 10% penalty. 

Why is it not calculating correctly?