1099Q and 1009T

[pjkel74-44]

Our son does not qualifyl for any educational credit because of our income  What do we do with the 1099Q sent to my husband and the 1098T sent to our son from his college?

[MinhT1 · Accepted solution]

For form 1099-Q:

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 read: "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." 

If the distribution reported in box 1 is more than total education expenses (including room and board), then the 1099-Q has to be entered on your tax return and the earnings portion related to the excess distribution is taxable (and may be subject to the 10% penalty)

For form 1098-T:

If your income is too high to claim any education credits, then you do not have to enter that form on your tax returns. 

However, on the form 1098-T, if your son had scholarships in excess of tuition, he has to report this excess as income on his own tax return. But if his own income (wages) plus that excess is less than the standard dection of $12,550, he is not required to file a tax return.

[pjkel74-44]

Follow up question to my question re 1099Q and 1098T;  how do you input the educational expenses in order for Turbo Tax to create the 1099Q worksheet?  Once I input the 1099Q amount Turbo Tax says we don't qualify for any educational credits and gives us no way to enter the expenses--just throws us back to the original input point.  Since my son has very little income should we put the information on his return?  Or is there some way to bypass the statement that we don't qualify for any educational credits on our (parents) return?

[ThomasM125]

There is no way to bypass the statement about not qualifying for an education credit. You can enter the form 1098-T and 1099-Q on your son's tax return to have the 1099-Q worksheets populate. But it may be simpler to just keep the two forms as they contain the information necessary to determine if the education plan distributions are taxable.