1099-Q box 4 Bug

[mghanosh]

I received a 1099-Q this year because my dad contributed to my Roth IRA. I get all the way to filing on the web version, and boom, I get hit with an issue on box 4. Apparently, when box b is checked, TT software is not updated yet to handle this. Super frustrating as this is the last thing I need to file (and I'd rather not do an amended return). Does anyone else have b checked on their box 4 in TT, and are you also getting this problem? And if so, what is the workaround you found? Rep said mid-March to early April is when they would update the software but that seems like a joke considering how much people pay for this.

[Hal_Al · Accepted solution]

If the distribution was $7000 or less  and it all went to the Roth IRA, then just just ignore the 1099-Q. 

The 1099-Q is  only an informational document. The numbers on it are not required to be entered onto your (or your student's) tax return. The interview is complicated and it's easy to make mistakes. Avoid it if you can and you  can. 

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (or a rollover to a Roth IRA) 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 don’t need it). 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.

References:

1. 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." 
2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
3. "IRS Publication 970, Tax Benefits for Education states: If the entire 1099-Q went to qualified expenses, room and board, tuition, etc; then, you do not need to enter the form." 

[mghanosh]

So are you saying I don’t need to report it all?  The money in box 1, which was $7000, was all rolled over into my Roth IRA from the 529 account that my dad had for me for years. Box 2 and 3 are less. Than that $7000. I’ve never had a 1099-Q so just thought it’d be put into TT. 

[Hal_Al]

Q. So are you saying I don’t need to report it all? 

A. Yes. 

Q. I just thought it’d be put into TT?

A. No. TurboTax will put nothing about the 1099-Q on the actual tax forms.  You essentially do not send anything to the IRS about your distribution, when it is a "qualified distribution".  A contribution to a Roth IRA is a "qualified distribution".