Can someone answer this 1099Q / 1098T question...it seems to be a common issue..that confuses all...PLESE HELP!!!

[jlar]

Thanks @NCperson 

I thought I read other posts where folks are saying a calculation can be made for 'living at home'.... cause 'you gotta eat', etc....as long as it doesn't exceed the COA the school publishes.

'Incurred' is indeed the question. Does 'incurred' require a contract? Or specified payment dates/terms? Or a start/stop time? There is a LOT of gray here.

I'm still thinking of calling on a CPA just to see what they say. 

As @confusedrf  stated...maybe it's better to NOT SUBMIT anything and roll the dice on a letter or audit. I don't find that acceptable, but perhaps that's why that advice is often made. TurboTax provides ZERO HELP for those of us with the circumstance. So I may as well just sent it in and if they don't like it I'll gladly pay the true amount if it can be figured out and documented correctly. The cost of fines and penalties may even be cheaper than going to a CPA!

In our case, if she doesn't have Room and Board her tax due will go up. Though I think its just the 'income tax' (she is above the standard deduction). The 'penalty' portion should NOT apply because there is an explicit exception for that.

BUT, you need to know how to enter such values into the 1099-Q manually. I've tried some of those 'overrides' and it seems like those lines were put there for such reasons, though I've not heard anyone else mention them.

[NCperson]

@jlar 

definition of "incurred" 

to come into or acquire (some consequence, usually undesirable or injurious): to incur a huge number of debts. to become liable or subject to through one's own action; bring or take upon oneself: to incur his displeasure.

I don't know what debts or liability the child is taking on unless the fork over rent and meal money to the parents. (or there is a signed contract that the child promises to pay the rent......however, care is to be taken as that is probably taxable income to the parents when paid.  Just my two cents. 

but here is the broader question, why did you take so much money out of the 529?  this situation suggests it wasn't required for college, hence the tax.  If you post Box 1 and Box 5 of the 1098T and Box 1 and Box 2 of the 1099Q, I can show you the math.   Also, were you able to take the AOTC credit? how much. the whole $2500?????

[jlar]

@NCperson Thank you!

Well, this sent a shudder down my spine: "probably taxable income to the parents when paid".

So, 7590 - 4000 AOTC = 3590 'to cover'. Earnings on that is 2158. She had books around $400. So around 3190 'to cover'. ...and a little less on the 'earned' though I haven't actually run that yet.

She is above, 12,220 so there is 10% INCOME TAX on the $2158 or any amount CAUSED BY me using 4k to get the AOTC on my (parent) return. Plus 10% penalty - this also needs to be addressed because it's been stated many times...and there is a VERY specific line item on Form 1099Q for this...that is, there should be no penalty if this 'gap' of 529 1099Q over tuition is CAUSED BY taking the AOTC.

However, the way TT walks me through, it is a -923 delta on her Fed Tax. That is because TT asks NO questions about the 1098T (it only says 'the parent will use that on their return to get a credit').  SO, TT is giving her the earned portion of the full  7590 (4618) on her return - and adding 10% income tax + 10% penalty.

I know that is NOT correct. But I've 'walked through' it several times and gotten the same result. The only way I've found to adjust this is to use the OVERRIDE feature on the line 2c, 2e down in the last two sections of the 1099Q Form.

Has anyone ever used the overide on those lines?

TT leaves a big whole here...because it doesn't seem to know that I as the parent only need to use 4000 of that 1098 T to get the AOTC.  I need some way to tell TT about the 3590 that is being STRANDED on my (parent) return. 

This is why I think people are saying DON'T FILE 1099Q. It may be better just to send an explanation letter later.

[jlar]

@confusedrf  - Sorry, I seem to have hijacked your thread ... but you are good right?

[NCperson]

@jlar have we answered the question whether she even had to file a return? and this assumes the 1099Q has HER social security number on it (otherwise, it's your earned income)

The requirement is

1) no federal withholdings (only way to get the money back is to file) AND

2) earned income (and the 529 money is considered earned income) < earned income +350 OR total income < $12,200.

the taxable income is

$24215 - 16650 - 4000 = 3565. 

1099Q distribution was 7590 - 3565 = 4025 was not required to cover the expenses.  4025 / 7590 = 53%

4618*53% = 2448 is taxable income and it is EARNED income.  how much other income does she have - is she required to file in any event?

why not just post on her return for the 1099Q Box 1: 4618, Box 2 2448 - i wonder if that will do the trick. 

[jlar]

adjusting what i enter on the 1099Q is i guess another option.

But I still think there are lines on the full 1099 form to adjust it down in a similar fashion...you just have to use the Manual Override in form mode.

She needs to file to get back substantial withholding.

Your numbers came out a little different than I thought but close.

Has anyone tried the 'talk to a real live cpa' option that you can pay for through turbo tax? I wonder if that would be worth it. I think its like $100 plus....but cheaper than starting over and going to a local accountant.

[confusedrf]

Just saw your question...'Loan Expenses'

My understanding is that loans taken by parents or student, count towards the $4k required for AOC...if this is wrong, let me know....

[confusedrf]

No problem hi0jacking the  thread. Am I ok...who the heck knows.  If my loan assumption in th eabove oost is correct I think so.

I think I will try some othe rsoftware next year. I need something that conclusively insures I do not over pay or under pay.

Finally, regarding:

1098T box 1: 24215 (this is scholarship plus what i paid via 529)

1098T box 5: 16650 (this was the scholarship for the full year)

1099Q 1): 7590

1099Q 2): 4618.33

1099Q 3): 2971.67

Is it me or did you overdraw your 529 by $7600...I'm confused why so much was taken out...I must have missed something...I should go back and reread.

This I serious crap,,shame on TT. I mean who needs an audit a few years down the road and you find out you owe 3 years of AOC back with interest...how many of us will have $7500+ to pull out out butts!

[jlar]

LOL

I have no idea why  people keep asking me if I over drew the 529. I just can't see it...

I paid what was due for one quarter directly to the school. 

No money was taken out other than direct pay to the university for what was due after the university provided scholarship.

[jlar]

I'm back to something I saw on day 1: "Form 8615 is not done"....

"We can't file your return just yet because the government is STILL WORKING on finishing up certain tax forms that are in your 2019 tax return.

Available to file by 3/5/2020

Went through it again and got a new number. TT let me enter the 1098T on my daughters return but said I can't use it (because she is a dependent)...But it kind of recognized I'm doing something with that 1098T on my (parent) return. It wants to tax the whole 1099-Q $4618  'earnings' as regular income. But it was SMART ENOUGH this time to know NOT to add the 10% PENALTY (i.e. it automatically filled in the final lines on the 1099Q that I keep mentioning).

I looked on 1099Q and I can see TT is now entering numbers in the lines in the last two sections....but still nothing on line 2C...that is where I entered the (OVERRIDE) amount of tuition expenses that were STRANDED on my (parent) return ($3590)...plus her book costs. Update: It's actually $3565 remaining as there was a $25 fee adjustment.

I think I asked this before many times in many ways: If the 1098T is $7590 and I enter it on my own (parent) return and 'used' $4000 of that to claim the AOTC...Don't I get the right to move the remaining $3565 (7565-4000) back to my daughters return to offset the 1099Q 'earnings'? And also allow her to claim her book costs on that same line? I'm not 'double dipping'...I'm just moving what I didn't 'use' (to claim the AOTC) back to my daughters return.

However....

TT makes it sound like that "BECAUSE SHE IS A DEPENDENT, SHE CANNOT DEDUCT ANY COLLEGE COSTS"....all her 529 money (earnings) are being FULLY TAXED. That seems Bogus.

And it also 'implies' that you CANNOT transfer any 1098-T dollars back to your dependents form to help offset the 529 'earnings'.

So THIS is the final, specific, question:

******************************************************

**Can i enter a 1099Q line 2c "Adjusted Qualified Higher Education Expenses applied" amount on my daughters federal return to 'transfer' the amount of 1098-T qualified expenses entered (on my/parent return) and 'stranded' (i.e. in excess of the $4000 AOTC qualification)...plus other qualified costs, such as books, Room and Board, etc.

******************************************************

@Hal_Al - Could you swoop back in and look at this last question. I know you have said "Just don't enter the 1099Q"...but I'm curious if what I am proposing is viable.

[NCperson]

there were changes made for 2019; suggest reading IRS publication 970 starting on page 31.  

I don't see anything about loans payments being a qualified educational expense for AOTC. see page 13 of the same document.  

this related to the 529 distribution (QTP);

Student loan interest deduction.
• For 2019, the amount of your student loan interest deduction is gradually reduced (phased out) if your MAGI is between $70,000 and $85,000 ($140,000 and $170,000 if you file a joint return). You can’t claim the deduction if your MAGI is $85,000 or more ($170,000 or more if you file a joint return).
• You can’t deduct as interest on a student loan any amount paid from a distribution of earnings made from a qualified tuition program (QTP) after 2018 to the extent the earnings are treated as tax free because they were used to pay student loan interest.

[NCperson]

@jlar 

**Can i enter a 1099Q line 2c "Adjusted Qualified Higher Education Expenses applied" amount on my daughters federal return to 'transfer' the amount of 1098-T qualified expenses entered (on my/parent return) and 'stranded' (i.e. in excess of the $4000 AOTC qualification)...plus other qualified costs, such as books, Room and Board, etc.

see IRS  publication 970 page 60"

Coordination With Tuition and Fees Deduction A tuition and fees deduction (see chapter 6) can be
claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses aren't used for both benefits.

so it would appear the answer to your question is 'yes" because coordination is permitted and it never says you can't transfer unused dollars from parent to student (and let's assume the student has to be a dependent of the parent)

[confusedrf]

This is nuts. 1098t shows $40k payments and $22k scholarships. Enter it into TT.

1099q shows $11k paid to college from 529 plan. Enter that into TT.

TT says I get AOC of $2500.

Why?  I assume because $40k - &22k - $11k is $7k which is greater than $4k.

That is $7 in payments made by my dependent daughter via  a Fed ubsub loan and a little cash from me.

So now the loan described above don't count towards the 4k required for AOC?  Then TT should prompt about that $7k in payments....and adjust accordingly.

Note too this from halall on page 1 of this conversation...

40K expenses minus 22K scholarship = 18K.  18K minus 11K paid by 529 plan = $7K eligible for Tuition credit. So, yes, the 1K from savings and the  $6K loan  counts towards that 4K magic number.  Even though the loan was your daughter's, you get to count it on your return, because she is your dependent

No one mentioned him being wrong? Is he? I wish my hours were better I'd call the IRS.

[confusedrf]

Does this not mean the loans count?

https://turbotax-intuit-com.cdn.ampproject.org/v/s/turbotax.intuit.com/tax-tips/college-and-educatio...

[NCperson]

@confusedrf - what TT states is that the loan PROCEEDS can be used to pay for the qualified expenses.  

it never says making the payments themselves is a qualified expense.  

this is also on page 13 and is consistent with what TT is saying: 

Paid with borrowed funds. You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is re-paid. Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account.