My child with autism graduated high school and began an independent living program which is a collaboration between our community college and local 501 c 3 autism organization. We pay our tuition to the autism organization and use her Coverdell IRA so we do not receive a 1098 T. How do I enter the amount paid in Turbo Tax so it balances with her 1099 Q?
Turbo Tax won't let me enter it until I enter her education expenses. I don't have a 1099-T and that is the only way it lets you enter tuition expenses. Thank you!
You do not need a 1098-T.
Simply enter the 1099-Q and follow the interview in TurboTax which will ask if the funds were used for educational purposes.
Answer "Yes" and the applicable amount.
Alternatively, don't enter the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including special needs services, 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.
Thank you very much. I just didn't want to make a mistake and get audited. Really appreciate your help!
Does that mean I am not eligible for the American Opportunity Education Credit for her?
Q. Does that mean I am not eligible for the American Opportunity Education Tax Credit (AOTC) for her?
A. Simple answer: yes.
But taxes aren't simple. What it means is: you can't "double dip". You can't use the same expenses to claim both the AOTC and the Coverdell ESA to be tax free. For most people, it is better to claim the AOTC, even if you need to pay a little tax on the ESA. The 10% penalty (but not the tax) is waived in that situation.
I took out Coverdell funds to cover $11,000 of the program, but the cost to me was twice that. Why couldn't I use the AOTC?
Q. Why couldn't I use the AOTC?
A. Are you saying TurboTax is not giving it to you? It's not clear to me whether your "independent living program which is a collaboration between our community college and local 501 c 3 autism organization" meets the requirement. You may have to ask your organization. Assuming it does, you still have to meet the other standards. See https://www.irs.gov/Individuals/AOTC
Yo may have to use a workaround in the TT interview. When asked if you got 1098-T, answer no but say you qualify for an exception. List the community college, not the organization as the school.