1099Q and 1098T

[woobiedmd]

HELP!!!  I am entering my Fidelity 1099Q (I am the recipient, but NOT the beneficiary - my son is -  so I was told I need to report to avoid IRS issues).  I entered qualifying expenses from  1098T which equal the 1099Q distribution.  I should not be taxed since they zero out.  However, on line 21of my 1040, a "random" amount (I have no idea where the amount is coming from) of 1099Q income is appearing and I am being taxed on it.  Why is that happening?  Spent over an hour on the phone with Turbo Tax and their only solution was to just enter a negative amount of income somewhere else to zero out the entry.  That sounds rather "clunky" to me....the system should work.  This is not an uncommon thing.  Anyone else have this problem?!

[ChristinaS]

Is there a scholarship involved (1098-T, Box 5)? Is there a tax credit for education on your return? Is your son a dependent?
TurboTax handles 529 distributions, but all these things play together. Please just describe your situation in more detail.

[woobiedmd]

No scholarship; no tax credit for education; son IS a dependent.  Not sure why it is not just "zeroing" out the two entries.  As I said, very long conversation with "tax expert" at Turbo Tax (they were logged into my computer looking at my screen, etc.) and they couldn't figure out why I had a large increase to both federal and state because of this.  I don't like just entering a negative number to zero it out as they suggested...that isn't right.  AHHHHHH!!!!!!!

[ChristinaS]

Please see my response that I posted. Its probably the entry under Amount Calculated... Turbo Tax handles this... but it is sensitive, I won't lie. Also, if its not taxable... it simply doesn't end up on Line 21. Nothing is reported to the IRS other than the taxable amount. They don't get worksheets. So, you are (kind of) wasting your time in that sense. I personally just wouldn't bother inputting it.

[ChristinaS · Accepted solution]

There are a few tips to ensure that the expenses "communicate with" the 1099-Q:

1. Enter the education expenses after the 1099-Q entry. If you entered the education first, edit and go through the screens again after the 1099-Q is inputted. Just revisit Federal Taxes- Deductions and Credits- Education
2. In the section for the Education expenses, the program will generate a tax credit if you are permitted one based on your income. If you are, the expenses will move towards that before they are applied to the 529 earnings. If you had room and board, make sure you list that, as that cannot be used for credits anyway.

If you do not qualify for the credit, put $0 in the screen below within the Education section- this can be critical: "Amount Used to Calculate Education Credit or Deduction". Otherwise, the program is applying expenses towards a credit which you aren't getting.

**You can get back to this question by clicking Edit next to Education Information under Here's Your Education Summary.**

[woobiedmd]

Thank you so much....I will definitely try what you suggested first thing tomorrow morning...I can't handle any more of it tonight! 🙂  I am excited and hopeful that you at least have a suggestion for me - nothing even close to that came up in over an hour on the phone with the turbo tax experts.  I will report back with news! 🙂  THANKS !!!!!

[ChristinaS]

Great, thanks... If your expenses are well over your earnings and you put 0 in the box, its like magic!! And I totally understand having to get away.. I'm here all day;-)

[woobiedmd]

HORRAY!!  IT WORKED!! (insert sound of angel harps here)....You gave me the solution in seconds....what a waste of time on the phone yesterday....HUG HUG KISS KISS  THANK YOU SO MUCH!!!  Ellen 🙂

[ChristinaS]

You are very welcome! And thank you much for the kind expression of your gratitude:-) I will say that, because its not really a tax issue so much as a software issue.... its just perhaps not something that the phone agent knew. I have been an employee for years now, so I guess I just happened to know the program better. Either way, I'm glad you got your solution in the end.

[nmgeek]

This is a bug that's going to cost users real dollars, right?  It's logical to enter the expenses first then enter the 1099-Q data when the form later arrives in the mail.