1099-Q Received in Parent's Name for Daughter’s Qualified Room and Board – Does the Parent or Daughter Report It?

[pgpg]

I have received a 1099-Q in my name, as I am the account owner, and it is linked to my SSN. However, the distribution was a qualified distribution to pay for my daughter’s room and board, and she is the beneficiary of the 529 plan account. I am filing my own tax return, and she is filing hers. Where should we enter this 1099-Q information? Should it go on my tax return or on my daughter's tax return? Thanks, and I appreciate your help.

[MinhT1 · Accepted solution]

The form 1099-Q if it has be filed will go on your tax return as the owner of the account.

If the distribution is justified by qualified education expenses (including room and board) then you do not need to enter it on your tax return. Just keep the form in your tax records and any calculation to show that the distribution is fully used for education expenses of the beneficiary.

On form 1099-Q, instructions to the recipient read: "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.

[Hal_Al · Accepted solution]

Q. 1099-Q Received in Parent's Name for Daughter’s Qualified Room and Board – Does the Parent or Daughter Report It?

A. Nobody reports it, basically because it was all used for room and board.  Room and board (R&B) are a qualified expense for a 529 distribution. But, R&B are not qualified expenses for the education credit or tax free scholarship. So, there is no "conflict" for how the R&B expenses will be allocated.  It all goes to the 1099-Q. 

The 1099-Q is  only an informational document. The numbers on it are not required to be entered onto your (or your student's) tax return. The interview is complicated and it's easy to make mistakes. Avoid it if you can and you can. 

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 (you don’t need it). 

References:

1. 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." 
2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
3. "IRS Publication 970, Tax Benefits for Education states: If the entire 1099-Q went to qualified expenses, room and board, tuition, etc; then, you do not need to enter the form." 

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
If it needs to be reported (and it doesn't in this case), the 1099-Q gets reported on the recipient's return. The recipient's name & SS# will be on the 1099-Q.

[pgpg]

Thanks for your response, @MinhT1 and @Hal_Al . I have a couple of follow-up questions:

1. Does Fidelity (which maintains my 529 plan) send 1099-Q information to the IRS?

2. It looks like TurboTax is sending the 1099-Q and 1098-T forms to the IRS, because when I checked all the official forms included in the filing, those documents were listed. Why is TurboTax including them in the filing?

I filed my daughter's taxes, and I can see both the 1099-Q and 1098-T in the filed copy.

If the answer to #1 or #2 is yes, should I enter the 1099-Q that came under my name in TurboTax, rather than ignoring it?

Thanks in advance!

[AmyC]

1. Yes,  the 1099-Q is reported to the IRS.

2. Only the tax forms are going to the IRS. They already have the documents.

3. If all of the 1099-Q was used on 529 qualified Room and Board  and Qualified Education Expenses - Internal Revenue Service then, a nontaxable transaction should not be entered.  IRS Publication 970, Tax Benefits for Education states:

Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

[Hal_Al]

Q. Does Fidelity (which maintains my 529 plan) send 1099-Q information to the IRS?

A. Yes. It's the exact 1099-Q that you get a copy of. 

Q. It looks like TurboTax is sending the 1099-Q and 1098-T forms to the IRS, because when I checked all the official forms included in the filing, those documents were listed. 

A. No. What you are seeing is worksheets, not IRS forms.  These are for you records and are not sent to the IRS. 

Q. I filed my daughter's taxes, and I can see both the 1099-Q and 1098-T in the filed copy.

A. Again, worksheets,  not forms. Not sent to the IRS.

The 1098-T and 1099-Q are informational only. They are not controlling documents.  

If the answer to #1 or #2 is yes, should I enter the 1099-Q that came under my name in TurboTax, rather than ignoring it?