1099Q and 1098T questions

[jbeth]

Hi...there are several threads on this subject and unfortunately I still have questions on how to handle this.  My son received a 1099Q from the mutual fund company for an education savings account we opened on his behalf.  He is the beneficiary on the 1099Q (his TIN number is listed on it).  The amount in box 1 (gross distribution) was $11,300.00.  Coverdell ESA has an X....fair market value is 0.00.  The 1098T has 17250.00 in Box 1 and $3750.00 in Box 5 (scholarship).

Based on what I have read in this forum I added the 1098T on my tax return as he is my dependent.  I also created a tax return for him to add the 1099Q but he has no income so when I did his tax return he has not tax liability federal or state.  All the funds from the Coverdell ESA were used to pay tuition for the first semester.  I am confused as to how the IRS is going to be able to match the 1099Q and 1098T's...do I file a zero tax return for him?  Do I include the 1099Q on my return? (parent tax return). 

feedback welcomed and appreciated   

[AmyC · Accepted solution]

Your 1099Q is less than the cost of tuition so it does not need to be included. You are right, the IRS would never get them matched up. If your son only has the scholarship income, then he does not need a return. His scholarship plus 1099Q is still less than the education costs. 

Be sure to add any additional expenses paid for supplies, books, etc. 

[jbeth]

Thanks AmyC...yes I added as well expenses incurred on books as well as new laptop we had to purchase for him...altogether about $2000.00 extra on top of what the 1098T listed   

[ThomasM125]

Your would enter the 1098-T information on your tax return, assuming your son is your dependent. You may be entitled to an education credit based on the information reported on the form 1098-T.

The 1099-Q would be entered on your son's tax return, but if it results in no tax due then you would not have to file a return for him. 

[jbeth]

Thanks ThomasM125...both replies lead in the same direction.  

[Hal_Al]

 " I am confused as to how the IRS is going to be able to match the 1099Q and 1098T's"

In actuality they IRS can't match em up.  So, there is nothing you can do to prevent an IRS inquiry. We have seen several  posts about IRS letters on 1099-Q. If you get one, you just send copies of your receipts and school billing to prove you paid expenses.