Say a dependent student has a 1098-T for $4,000 in Tuition payments (all current year) and $3,500 in Room and Board and other required fees.  And the Parent withdraws from a couple of 529 plans, the exact amount of $7,500. On the Student Information page, you tell it that NONE of the expenses are used for credit or deduction.  So all those -0- out, and you get no Form 8863.  My question is, how does ye olde IRS know that the earnings of the 529 plan are not taxable, and were used properly to cover expenses, if NO form is submitted with the tax return?

I actually had to submit the Student info form as a response to an IRS assessment that the earnings were taxable in a situation similar to this last summer.  And they accepted the response and removed the assessment.  So, will that probably be the norm in those situations?