My son's university sent him a 1098-T, but it only shows qualified expenses paid to the school. Qualified expenses like textbooks, room and board credit (he lives at home), a computer, etc that we purchased NOT through the university aren't reflected in box 1 of 1098-T total. As a result, TT says we have all these taxable 529 distributions. That doesn't seem right. It seems like there should be some place for us to tell TT that the rest of the 529 distributions are all qualified expenses regardless of what the university reports.
What am I doing wrong?
Q. What am I doing wrong?
A. You must enter the 1099-Q before you enter the 1098-T. This tells TT that you have a 529 distribution and need to enter those additional expenses. Answer yes to the book expenses question, to get to that screen.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip!
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
Form 1098-T only reports tuition paid to the school.
After entering the 1098-T,
return to the Education Section
(under Deductions & Credits)
Click UPDATE to "Expenses and Scholarships (Form 1098-T)"
Click Edit by the student
This should get you to the "Here's Your Education Summary" screen
Click "Other Education Expenses (for all schools)"
Select YES and enter books and supplies including a computer or laptop if required.
Room and Board is only entered if you also have a distribution from an education savings account.
You must enter the 1099-Q first in order for the program to allow you to enter room and board
You may need to go through all 4 parts of the education section and interview for the program to make the calculations.
If you are not happy with the results, type
letme
into the search-box and the program should show you the credit it took.
Thank you for your reply! What has me a bit wrapped around the axle is, "You must enter the 1099-Q before you enter the 1098-T", but then you say, "You can just not report the 1099-Q". Despite what you're saying, I can't help but feel like I'm doing something wrong by not entering 1099-Q. Does the IRS not care about this?
"Room and Board is only entered if you also have a distribution from an education savings account. "
Are you referring to a 529 account?
Q. I can't help but feel like I'm doing something wrong by not entering 1099-Q. Does the IRS not care about this?
A. Even if you enter the 1099-Q and TT correctly calculates that none of it is taxable, nothing about the distribution, or the 1099-Q, is sent to the IRS. It is not reported on your tax return. Entering it does not reduce you chances of hearing from the IRS. There is no IRS form that is filled out and sent with your tax return.
Q. You must enter the 1099-Q before you enter the 1098-T", but then you say, "You can just not report the 1099-Q".
A. The 1099-Q is just an informational document, you are not required to report it on your tax return. But if you do try to enter it (and many people do, for the same reason you're reluctant), you must enter the 1099-Q to get TT to generate the screen you need.
There is no way to report the 1099-Q info, to the IRS. You can only report the taxable amount (except if the taxable amount is 0).
529 plans and ESAs (education savings accounts) are slightly different versions of Qualified Tuition Plans (QTP).
The rules are essentially the same for both of them. Tax guys use the terms interchangeably, although they're not exactly the same. The 529 is the newer improved version of the old ESA.