You should have the beneficiary make the distributions, or send the funds directly to the school, so that the 1099-Q is issued to the student at the end of the year.
If you entered the 1099-Q first and then the expenses, the program should ask if you wish to apply the expenses towards a credit or the distribution. If you enter the 1098-T first, the program may compute the credit first, and when the 1099-Q is entered later, the program may not give you the option and simply tax the distribution.
You can see which option is best for you.
If the 1099-Q is issued to the student, and the credit is more advantageous to you, the student will be taxed on the earnings of the 1099-Q at the student's (normally) lower rate. In fact, it may not be taxable at all if the student's income is under the limit.
Please click the link below for more information from the IRS on how to maximize the credit.
CLICK HERE for IRS Pub 970 Tax Benefits for Education
You should have the beneficiary make the distributions, or send the funds directly to the school, so that the 1099-Q is issued to the student at the end of the year.
If you entered the 1099-Q first and then the expenses, the program should ask if you wish to apply the expenses towards a credit or the distribution. If you enter the 1098-T first, the program may compute the credit first, and when the 1099-Q is entered later, the program may not give you the option and simply tax the distribution.
You can see which option is best for you.
If the 1099-Q is issued to the student, and the credit is more advantageous to you, the student will be taxed on the earnings of the 1099-Q at the student's (normally) lower rate. In fact, it may not be taxable at all if the student's income is under the limit.
Please click the link below for more information from the IRS on how to maximize the credit.
CLICK HERE for IRS Pub 970 Tax Benefits for Education