Daughter 1098T and 1099G (529 distribution) are both in her name. We claim her as dependent, make too much for Am Opp credit. Put 1098T on both, & 1099-G on her return?

[Where-sMy3x5Card]

Topic 1098T handling.  Situation:  Daughter 1098T and 1099-G (529 distribution) are both in daughter's name.  We claim daughter as dependent.  Wife and I have too high income to claim any credit under American Opportunity act.   I put 1098T on our taxes.  Nets $0 deductions.  I put 1099G 529 dist on daughters return and it reduced her refund because NOTHING in her filing shows education expenses to offset the 529.  So, I put the 1098T expenses on her return as well.

Of course she doesn't get a tax credit on tuition because I claim her as dependent.  But, otherwise she would pay penalty on 529 distribution.

Is this okay?  Or should I pull her 1098T off of our return (again we don't get squat for it anyway), just keep her as the dependent and be on our merry way?

Turbo tax, when filling her return, had a hint that "parent likely put expenses on their return, but should enter her college expenses there also to avoid taxes on 1099G (529 dist.) intended to pay for those expenses" (something like that).  

Either way having the 1098T on us parent's return yields no additional benefit due to income level.  

I cannot believe how not straightforward this is.  I've seen a lot of posts on it, but none quite the same scenarios.  Thanks

[maglib · Accepted solution]

You may want to choose to try to remove her as a dependent and let her file with claiming she can be claimed as a dependent on another tax return but you don't claim her.  Then she qualifies to get the tax credit to the extent of her tax liability (normally, this works well when student is subject to kiddie taxes or has high income).  The loss of the dependent though must be weighed.  Do remember if you do remove her as a dependent on your federal return that she may be allowed to be added back for state purposes (states do not necesarilly follow the fed and she was eligible you just chose not to claim her).    File the  1098T on her return and see if there is any savings with you not claiming her.

Otherwise, if you claim her, you must report the 1098T on your return as it's reported on whomever claims the dependent exemption.  

****The 1099Q is not required to be reported anywhere.   If the distribution doesn’t exceed the amount of the student's qualifying expenses, then you don't have to report any of the distribution as income on your tax return. If the distribution exceeds these expenses, then you must report the earnings on the excess as "other income" on your tax return. When you pay a student’s school expenses with these funds, you cannot claim a tuition deduction or either of the educational tax credits for the same expense. https://turbotax.intuit.com/tax-tips/college-and-education/what-is-irs-form-1099-q/L7MAdcKz5

[KrisD]

If the distribution paid unreimbursed education expenses, don't report the distribution as taxable income. If you do not qualify for an education credit, do not report the 1098-T as long as your daughter did not get more tax-free assistance (scholarships) than what was paid as expenses in 2017. Keep a copy of the 1098-T, the distribution from the 529, as well as her school statement with both your tax files. Claim her exemption and move on. 

The expenses and credits can be manipulated a bit, so the reporting can get complicated at times.  

[Where-sMy3x5Card]

I think I've netted out, that not putting 1098-T on ours.  Have to claim her as dependent anyway.  As I said earlier, I can't qualify for the credit anyway. I removed it and it didn't change our numbers one iota.  

I'll put both the 1098-T and 1099-G on hers.  She is marked as dependent, and doesn't qualify for the American Opportunity credit either because checked as "someone else can claim her as a dependent".  The 1098-T documents on her return what the 1099-G was covering.  The 1098-T is much higher than the 1099-G anyway.  Then she's not taxed on the 1099-G as unqualified (non education) expenses.  Without the 1098-T on her return, the software was treating the 1099-G as unqualified reimbursement and taxing her on it.

I "believe" that this is still proper and works as neither situation is claiming the American Opportunity Tax credit anyway.  ??

[KrisD]

Yes, if the 1099 is for an education distribution, it would be a 1099-Q. (a 1099-G is usually a tax refund, unemployment or some other government payment). But the bottom line is yes, you are right. If you enter the forms on the student's return so that the distribution is not taxed, and the result also includes that the credits are not taken, it is fine. There is no credit and no tax due on the distribution.

[Where-sMy3x5Card]

Dang, yes I meant to say 1099-Q the entire time!  Crud.  529 distribution.

[Jcarter0729]

I claim both my daughters on my taxes my senior in high school who is 18 gotten a 1099g for PUA how do I claim that on my taxes? It only let me put it under me not under her as a dependent. Should I file hers alone?

[VolvoGirl]

You don't include their income on your return. It would only go on their return if they are required to file one.  They don't have to file if they only have W2 income under 12,400 but can file to get back any withholding taken out in boxes 2 or 17.  But you don't get boxes 4 or 6 back.

To file a separate return for a dependent you need to set up a new account separate from the parents.  Online is only good for one return per account.  You can use the same email address for 5 accounts.  You can probably use the Free Edition or the Free File website

Https://ttlc.intuit.com/questions/1894512-how-do-i-start-another-return-in-turbotax-online 

Be sure on the dependent return you check the box that says you can be claimed on someone else’s return.  If your only income is W2 and under 12,400 you do not have to file a return except to get back any withholding taken out.

Filing requirements for a dependent

https://ttlc.intuit.com/community/children-dependents/help/do-i-need-to-file-my-own-taxes-if-i-m-a-d...

[Hal_Al]

You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2020 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,400 (2020).
2.          Unearned income (interest, dividends, capital gains, unemployment compensation) of more than $1100.
3.          Unearned income over $350 and gross income of more than $1100
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2100 ($12.400 if under age 18)
5.          Other self employment income over $432, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

You may be wondering why there is an entry for child's income, in TurboTax. when you're working on your return. If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814.  But, since she has a 1099-G, she must file her own return.