I received 2 1099-Q's - how to enter?

[Hoosierina]

1098-T  Box 1 62,404   Box 5  40,500

1099-Q  Box 1   21,984  Box 2  5,777  Box 3  16,207   Recipient: daughter  This would be for tuition & fees, $ for $, sent directly to her college

1099-Q  Box 1  5,298  Box 2  1,407   Box 3  3,890   Recipient: me  I used 529 $ to reimburse myself for her off-campus r&b and it's well under COA level of her school.  Have every receipt, etc.

Confused as to how to enter 2 1099s and whether I even have to or not, since every dime was used for her allowable expenses, but somehow feel like I'm cheating if I don't report.  She really has no other income, not sure if she needs to file or not.  She's 20 and my dependent.

I've been so proud of myself as single mom for saving in 529 since her infancy to pay for school, then at tax time, when I enter info, TurboTax somehow taxes me (and vexes me) by making it seem like $$ is working *against* me.  Thanks for any insights!

[RobertB4444]

Since all of the money from the 1099-Qs was used for qualified expenses you are not required to enter them at all.  Keep your files in case the IRS requests the information but since they have received copies of the 1098-T as well I wouldn't expect to hear from them.

[Hoosierina]

Thanks so much!  would she need to file since she received one of the 1099s and the 1098?

[Hal_Al · Accepted solution]

Q. Would she need to file since she received one of the 1099s and the 1098?

A.  No.  Nothing is taxable to her.  The 1099-Q and the  1098-T are only  informational documents. The numbers on them are not required to be entered onto your (or your student's) tax return.

BUT, you don't mention whether you are eligible for the American Opportunity Credit  (AOC). You are if your income is under $90,000 ($180,000 Married filing jointly)

In that case, may want to pay a little tax on one of the 1099-Qs,  in order to get the $2500 credit.  Or better yet have the student declare about $4000 of her scholarship as taxable.  

You also don't mention any book or computer costs, which are also qualified expenses.

On your return, do not report the 1099-Q*.  Do enter her 1098-T to claim the AOC. 

On her return, do not enter the 1099-Q either.  Enter the 1098-T, with 0 in box 1 and $4080** in box 5.  Technically, she is still not required to file a tax return.  But, you may want to do so to document the reporting of the taxable scholarship. 

*You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. 

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

** $62,404 Total qualified expenses

    - 21,984  Covered by 529 distribution

         -4000  Used for AOC

   = 36,420  Can be covered by scholarship

$40,500 actual scholarship

- 36,420 qualified expenses

=  4080  Taxable Scholarship

[Hoosierina]

Thanks for all your help!  Her scholarship is in the form of tuition exchange 40,500 (I work at a college) so don't think that's taxable for either her or myself (and she gets $2K for National Merit Finalist for each of her 4 years, but I don't see that showing up anywhere...)

Income is under $90K.  Your advice on what to enter on her form (1098-T enter 0 in box 1 and $4080 in box 5) - I had no idea I could change what was in the boxes on the forms...   

Headed over now to try to get these finished - I thought I something was going on since refund half or less than last year, and maybe the AOC credit is the answer.