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dunes111
Level 1

1099-q

I am entering a 1099-q in turbo tax for my twins.  I am the account owner and my sons are the beneficiary.  The 1099-q has my ss# number as the recipient.  I used the money to pay for my sons college tuition. I have also added the 1098-t sent from the college.

 

When I list that I am the recipient my refund goes down even when I enter that my son's expenses were paid with the 1099-q fund.   and it doesn't prompt that it isn't taxable.   If I enter my sons as the recipient it says it is not taxable and the refund goes up.  How do I enter this ?   And the education credit goes down for my twins and my other son in college.

6 Replies
Hal_Al
Level 15

1099-q

First we need some clarification.

A 529 plan cannot have two beneficiaries (twins).  Then it sounds like you use the money from one child's  account to pay the expenses of a different child ("my son").

 

Alternatively; 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. 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 cannot double dip!  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

.

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." 

dunes111
Level 1

1099-q

Thank you for the quick reply..

 

For clarification I have two 529s ..one for each of my twins with each as the beneficiary and me as the owner.  I received one 1099-t with it broken out for each of them as they have different accounts.  I used all the money to pay for my twins tuition at a community college.

 

The amount for each of them on the 1099-q that I withdrew was a bit less than I paid for tuition.  Would I need to enter the 1099-q then in turbo tax? or do i not enter it and just enter the 1099-t?

Hal_Al
Level 15

1099-q

Q. Would I need to enter the 1099-q then in turbo tax?

A. No. You wouldn't enter the 1098-T either, unless you have enough expenses left over to claim the tuition credit. Then you would have to adjust the amount (reduce it by the amount used for the 1099-Q)

 

But, books and computers are qualified expenses for a 529 distribution, as well as room and board. Board is even allowed if the child lives at home (it's no so clear about "room"). 

 

So, you want to use those expenses for the 529, so that you can use tuition to claim an education credit.  If you have enough of those expenses to cover the 529, just don't enter the 1099-Q. Then enter the 1098-T to claim the tuition credit.

 

If you need to enter both the 1099-Q and 1098-T, TurboTax can handle both, but it gets complicated and you have to carefully enter all your expenses. For off campus room & board you can use actual costs or what the school charges on campus residents (whichever is less).  When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it ($4000 gets you the maximum credit).

 

See below for a detailed explanation

_______________________________________________________________________________

Qualified Tuition Plans  (QTP 529 Plans) Distributions

It’s complicated.

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.

You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.

 

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 
Example:
  $10,000 in educational expenses(including room & board)

   -$3000 paid by tax free scholarship***

   -$4000 used to claim the American Opportunity credit

 =$3000 Can be used against the 1099-Q (usually on the student’s return)

 

Box 1 of the 1099-Q is $5000

Box 2 is $600

3000/5000=60% of the earnings are tax free

60%x600= $360

You have $240 of taxable income (600-360)

 

**Alternatively; 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  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, in case of an IRS inquiry.

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." 

***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit.

 

 

 

 

dunes111
Level 1

1099-q

Just to clarify and I do appreciate your help.

 

My son has $3911 on the1098-t costs to college and I withdrew $3877 which is on the 1099-q. 

 

Do I have to enter the 1099- form? and I can I just enter the 1098-t costs to get the tuition credit?

 

Thanks again..

 

 

Hal_Al
Level 15

1099-q

Simple answer:  Yes, don't enter the 1099-Q. It's fully covered by expenses.

You can enter the 1098-T, for the credit. To simplify the process,  change the box 1 amount to $34 (3911 - 3877 = 34).  That will get you a $34 American Opportunity Credit (AOC).

 

BUT

The AOC can only be claimed 4 times during a student's undergraduate years (Grad school doesn't qualify). It's worth a maximum of $2500 each year.  You don't want to waste one of those times on $34.  Just don't enter the 1098-T.

 

BUT

There are two other ways of getting that $2500, this year:

1. How much do you have in room & board, books and computers?  Apply that to the 529 (1099-Q fund).

2. Pay some tax on the 529 distribution, so that you can use the entire $3911 (1098-T amount) to claim the AOC (you'll get $2488, assuming you have a tax liability of $1483 or more to offset).

 

I assume $3877 was the amount in box 1 of the 1099-Q. How much was in box 2? Box 2 is the maximum potential taxable amount.  I also assume box 5 of the 1098-T was 0 or blank.

 

 

 

 

dunes111
Level 1

1099-q

My sons stayed at home so no room and board.

I believe you mentioned and I see that you don't have to enter the 1099q if used for college expenses.  Can't I just enter the 1099-t to get the education deduction and not enter the 1099q or can I only get the difference between the 1099-t and 1099q?  

 

1099-q

Box 1 3877

Box 2 3318.34

Box3 558.66

box 4 unchecked

Box 5 "State"

box 6 checked

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