It depends. Whose social security number is on the 1099-Q? The 1099-Q is reported on the tax return of the social security number. Also, the 1099-Q is a form that does not have to be reported. If the full amount of the 529 distribution was used for qualified educational expenses, then you do not have to report the 1099-Q. Just keep the documentation supporting this with your tax papers.
Funds distributed from a 529 Plan, will be reported by the bank on a Form 1099-Q. The 1099-Q is sent to the owner/recipient of the 529 Plan funds. The Form 1099-Q is to be reported as income if they were not used to pay qualified college tuition/expenses. If the amount reported on the 1099-Q were used to cover qualified college tuition/expenses you do not need to report the income. If the amount exceeds the amount of college tuition/ expenses then the excess needs to be reported as other income on your 1040.
If you have a 1098-T and a 1099-Q, here is how this should be reported. Box 1 of the 1098-T is the payments received for qualified tuition and related expenses. Box 5 are scholarships and grants received by the student. The scholarship amount in Box 5 is subtracted from the amount in Box 1, The is the amount of tuition/expenses that the 529 Plan funds would be applied. When TurboTax is apply the 529 Plan funds it is only looking at the tuition/expenses. Room and board, transportation, and meals are not used in calculating the Adjusted Qualified Higher Education Expenses applied when compared to the distribution from the 529 Plans funds.
After applying the 529 Plan funds there is still a balance of tuition/expenses, then this amount is used to determine the amount of education credit. On the other hand, if the amount of scholarships in Box 5 and the 529 Plan Funds exceed the total qualified tuition/expenses in Box 1, then this amount is reported as income on the return.
Reporting 529 Plan Distribution
