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posted Apr 3, 2022 10:12:37 PM

I withdrew $10K from my daughter's 529 plan for K-12 tuition. How do I report this to avoid tax/penalty on the earnings? I have 1099-Q but no 1098-T.

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2 Replies
Expert Alumni
Apr 4, 2022 4:41:21 AM

If the entire distribution was used for qualified education expenses, even if you are listed as the beneficiary, it should not have any tax consequence on your return. To enter it in TurboTax:

  1. Open or continue your return.
  2. Select Federal and then Deductions & Credits.
  3. Scroll down to the Education section under All tax breaks.
  4. Select Show more and select Start or Revisit next to ESA and 529 qualified tuition programs (Form 1099-Q).
  5. Follow the screens to enter your info. Select yourself as the recipient* and under Who's the student? select your child.
  6. Enter the 1099-Q and answer the follow-up questions. When you are returned to Form 1099-Q Summary, select Done
  7. Select the level of school your child attended
  8. Enter your child's expenses after answering the question about qualified education loans

* If you or your spouse are not the recipient, but instead your child, then the 1099-Q does not need to be included on your tax return. If the entire amount of the distribution was not used for qualified education expenses and your child is listed as the recipient, you may need to file a tax return for them. Otherwise, if the entire distribution is used, nothing has to be filed for the 1099-Q. 

Level 15
Apr 4, 2022 7:12:57 AM

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including K-12 education, up to $10K,  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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip! 

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." 

 

The TT interview can be tricky and mistakes can happen.