1099-Q and 1098-T

[tonycil54]

sorry but your answer does not answer the problem I have had for years with Turbo tax. Both go on my tax return and the IRS does not see it anywhere on the return. As I said I have to print out the worksheets for my records and then send that to the IRS after they send me a letter. Bottom line is this problem does not exist for those people I know who use H&R block software. The amounts transfer to schedule 1 and then to the 1040

[Dadof2gr8kids]

Similar scenario with slight twist ... 1099-Q received in my name and 1098-T received in daughter's name.  1098-T Box 1 is greater than Box 5 figure, and total 1098-T amount is greater than 1099-Q withdrawal amount.  It's a qualified disbursement used to pay tuition.  I'm trying to enter both amounts on my 1040 but TurboTax is not providing an option to enter the 1099-T.   Is there an income limit on claiming the 1099-T?  Any thoughts on how to enter, or not enter, the information?  Thank you.

[NCperson]

assuming your daughter is also your claimed dependent, the 1098-T goes on your income tax return.  There is a phase out that begins at $160,000 (joint) and ends at $180,000, so if you income is higher than that, there is no benefit. (*)

Assuming you got no benefit because of the limitations above AND the Box 1 - Box 5 amount on the1098-T EXCEEDS the Box 1 amount on the 1099Q, there is no need to put the 1099Q on your tax form as the Box 2 earnings are not taxable.  Just keep good records of why you did what you did.

(*) if your income is less than that and there is no impact on your taxes, the must be a question you answered incorrectly or did not complete.  in the download / desktop version go to Forms view and look at your daughters line and the indented line under her name - are all the questions answered?

[i20000]

Hello,

I would appreciate if somebody can help me.  In my case I received 1099-Q in my name while the 1098 -T is in my daughter's name since she attended the graduate school.  Moreover she is not a dependent on my tax return.

Under these conditions when I enter the forms 1099-Q and 1098-T my Federal Tax due bill increases significantly since TurboTax thinks I got the 529 distribution though in reality I paid this distribution for my daughter's graduate school tuition payment.

I am in the process of completing the returns and now stuck up.

Any help will be greatly appreciated.

Thanks

[madmanc20]

Have a slight twist on my 1099-Q and 1098-T

The 2 withdraws from 529 (2 semesters) were processed differently. One directly to my wife's bank account before paying to the school. The other directly to the school. Consequently received 2 1099-Qs, one in my wife's tax ID and other in my college son's tax ID.

My income is too high for educational credits and all dependent tax benefits are phased out. So I will not claim son as dependent., College son's earned income not enough to pay of half of his support ($50k+ tuition in private university)

TurboTax won't let me enter son's tax ID 1099-Q into my tax return (wife and I file married joint) and won't let me enter my wife's tax ID 1099-Q into son's tax return. So I'm left with 2 choices

- Per NCperson's reply, qualified expense >= combined box1 of both 1099-Qs. So I can just not report 1099-Q and 1098-T on mine and son's tax return.

- Split 1098-T into 2 parts (allowed?) and report each half on the 2 tax returns to offset their respective 1099-Qs.

[DavidD66]

If you are claiming your son as a dependent, then you enter all of the Education information on your tax return, not your sons.  For information on Education Credits, go to:

What Education Credits are Available?

[madmanc20]

As noted, prefer to not claiming son as dependent. Therefore, 1099-Q entry doesn't provide an option on my tax return to state he is the beneficiary. Only me and my wife is listed.

I guess I  can claim him as dependent just to make the 1099-Q and 1098-T entry work properly. My income is too high to benefit from the added dependent. He will lose out on the $1800 Covid19 stimulus credit as a dependent.

Regarding if I can claim him as dependent. The nebulous question of "who" (me or my college son) provided the 529 $ for financial support looms. No clear guidance.

Safest audit path is probably me claim him as dependent, gain no tax benefit on my return, he loses out on Covid19 stimulus credit. Very conservative but safe but probably the right thing to do given our income level and purpose of Covid19 relief.

[KathrynG3]

If you provide more than 50% of your son's report, then he is still a dependent. You are correct, in general, college students without significant earned income are not included in the stimulus payments.

Your 529 plan fund distributed to your son, the beneficiary, in your son's name, are still coming from your plan. See: What does "financially support another person" mean?

Click the link for more guidance for entering: Form 1099-Q. and Form 1098-T.

@madmanc20 

[madmanc20]

@KathrynG3 

Thanks for the clarification. Very helpful. I'd imagine 529 plan owner (typically parents) is the clearest indicator this is not child's $ to meet their financial support. But some CPAs seem to want to interpret otherwise to gain educational credit and Covid stimulus.

I have a further question just to clarify all the details. Even if a college student have significant earning (Say a high paying summer internship) but the earning is not put towards their financial support (say they just put it in a bank or investment account), then they are still > 50% support from someone else that can claim them as a dependent. Correct?

[LenaH]

Yes, that is correct. They would qualify as your dependent under the qualifying child rules as long as they didn't provide more than half of their own support for the year. It is allowed for qualifying child dependents to earn income. Furthermore, they must be under the age of 24 (as a full-time student) and can not file a joint return with their spouse, if applicable. 

@madmanc

[madmanc20]

One more complexity

We processed the 2 (2 semester) 529 withdraws differently for 2020. One directly to school so college son is the recipient and the other to my wife (we file joint married) who then paid the school. Consequently we received 2 1099-Qs. One to my college son's tax ID as recipient and the other to my wife's tax ID as recipient. 529 administrator will not correct/reissue 1099-Q.

Turbotax will only allow me to enter the 1099-Q to the recipient's taxes. Even if my son is the dependent, Turbotax says if me/wife are not recipient, it will not let us enter the info from son's 1099-Q. Haven't yet received the 1098-T but I expect a single 1098-T issued in my college son's name and tax ID.

Qualified expense is > both 529 withdraws combined.

How do I enter all the education info (1099-Q, 1098-T)  into either mine or son's tax return?

UPDATE : Nevermind, once I entered a 1098-T (temporary from last year's data), it allowed me to enter 1099-Q for son as bene.

[AnnK1]

Hello. 
Sorry, I am still confused. 
In one response, it says to file the 1099q with my child’s return. In another response, it says to file it with my return. 
The 1099Q came in my child SSN. As did the 1098T. 
She had a modest income. She is a dependent. If I file the 1099Q with her return, she owes. 
And I cannot get the benefit of the 1098T due to my AGI. 
I tried to file the 1099q with my return but turbo tax said it would not be needed due to my AGI. So I am very confused. 

[AmyC]

@AnnK1  Usually, the 1099-Q does not need to be entered since it was used for room and board or other education expenses. The social on the 1099-Q generally wins. If there truly was an excess amount of money, then it would be taxable to your daughter. See my 529 example.

The 1098-T always comes in the student's social. It goes on the return of whomever is claiming the student. In your case, you. If it also contains scholarship income, look at another of my answers for help 

The goal is to get you the most money back for the least tax!

[madmanc20]

@AnnK1 

I had similar issue as you (high AGI so most deductions/credits phased out including education, dependent etc) Here is what I ended up doing after hearing so many opinions

- In my case 1099Q was funding for college and amount is completely offset with 1098-T. So both offsets and no tax no matter whos return it goes on.

- Decided my child is a dependent (contributed 50% of their support including education) Then enter 1098T & 1099Q into my taxes. Turbotax required 1098T to be entered first so a 1099Q that isn't your tax ID can be entered as beneficiary (since tax ID on 1099Q is the dependent/beneficiary). The need to enter 1098T first in Turbotax confused me for awhile as I couldn't enter the 1099Q with my child's tax ID into my tax return until I did 1098T first.

- Some people want to claim child is not dependent (try to get stimulus $, education credits etc) by citing the 529 $ technically belong to the child (for example, say a grand parent funded it). Anyway, I (the parent) funded the 529 so I see it as my funding education portion of their support.

[AnnK1]

Thank you for the quick response!

all of the amount on the 1099Q went to ward tuition, fees, and dorm. So I f I am reading your response correctly, I should not enter it in her either my child’s or my return. But be ready to prove that all the funds went to the school for tuition, fees, dorm. Is that correct? 
thanking you in advance.