1099Q Coverdell ESA 1099T

[fkz]

I have several questions on 1099Q and college education costs.

I received the 1099-Q form from my brokerage for the Coverdell ESA account, showing:

Recipient's TIN: my child's SSN

(addressed to

"me

FBO my child's name")

box1: gross distribution amount, which equals to the amount I sent to my child's medical school.

box 3:  Basis: blank

Fair market value: 0.00

distribution code: 1

Before I entered 1099-q and education cost information, I owned (married filing jointly) IRS ~$800. After I entered 1099Q info, I owned IRS ~$5000. After I entered the education cost, now I own IRS ~3000.

Now my questions:

1. Who is the recipient of the 1099Q, me or my daughter? 

2 Should I enter both 1099Q and 1099T info into MY return?

3. Is it necessary to track down my transaction history to calculate the basis of the Coverdell ESA account, and entered it to the 1099Q section in TurboTax, instead of entering 0?

4. All the distribution goes to medical school, Why I ended up paying more taxes?

Thanks,

S

[JohnB5677]

The recipient is your daughter, but this gets complicated.  You received the check (It would be better to have it sent directly to the school). That is why it is on your tax return.

Yes, you should post the 1099-T along with all of the other lodging, food, books and other fees not listed on the 1099-T.  This will offset most if not all of the 1099-Q distribution.

At this point you do not have to total your transaction history.  I think your daughter's expenses will take care of it.

I understand that the distribution went to the medical school.  But from the IRS's point of view, you got the check.  You now have to document how it was spent.

[fkz]

Thank you for your reply. One thing i do not understand is why I end up owing irs much more after I entered the 1099q and 1098 t information. Do I have the option not to enter either of them? Maybe it’sDue to my income level?

 Thanks,

 Steven

[AmyC]

If the entire amount of the 1099Q went to expenses, you are not required to file it. If you made money, then it needs to be added in to your return.

Guide to IRS Form 1099-Q: Payments from Qualified Education ...

The 1098T could have scholarships greater than tuition which also affects things.

The program was meant to work correctly when you enter the 1098T first and then the 1099-Q.

Your income does not affect the taxability of the distribution, it only affects education credits.

• What are examples of education expenses?
• What's the income limit for education expenses?
• What's the income limit for the American Opportunity and Lifetime Learning Credits?

[NCperson]

@JohnB5677 - I do not understand part of your response.

The SSN on the 1099Q indicates who received the money and who is responsible for determining whether any of the Box 2 earnings is taxable  @fkz stated that his daughter's SSN is on the form.  That means the money went directly to the school or to the daughter.  (If the parent's SSN was used, it means the parent received the money.)  The DAUGHTER must determine whether any of the Box 2 earnings are taxable for HER return; not the parent's return. 

The 2nd question not raised anywhere in the thread is whether the child is a dependent on the parent.  She is in med school.  Maybe she is and maybe she isn't  a dependent.  If she isn't then the 1098T goes on HER tax return.  @fkz : How old is she on 12/31/19 and is she your dependent on your tax return? 

[fkz]

Yes @NCperson She is my dependant, and is 23 yrs old on 12/31/2019. Even though her TIN is on the 1099Q form, the check was mailed to me, not directly to the medical school. Thank you for your comments.

[NCperson]

regardless of where the check was mailed, the 1099Q goes with her tax return since her SSN was used and was reported to the IRS  (and if any part of the earning is taxable, her tax rate is probably lower than yours!)

Assuming you are not claiming any Lifetime Learning Credit on YOUR tax return..... as long as BOX 1 on the 1098T less Box 5 on the 1098T plus all other qualified expenses (think Room and Board, Books, computer supplies) exceeds Box 1 on the Form 1099Q, there is no need to report the 1099Q on HER return

if you look closely at the instructions that came with the 1099Q, it states: '

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.

and you have determined the taxability is zero, if the expenses exceed Box1 on form 1099Q! Just put the supporting documentation in a drawer in case the IRS ever comes knocking.  

[fkz]

@AmyC Thank you for your explanation and the link. 

From the link I read 'For most qualified education program beneficiaries, the amounts reported on the 1099-Q aren’t reported on a tax return'. This is true for my daughter not to report 1099Q. Is it also true for me as a parent?

Thanks,

[rcdmkrok24906]

Just to confirm a TurboTax support call...

All three children are in college and I am not claiming them on my taxes.  I received 1099-Q's for each as they did as well.  Distributions were in my name and their name.  1099-T was in their names.  I was told all I have to do is enter the 1099-T on their taxes.  Nothing else on theirs or mine, correct.? I just to make sure I have all expenses adding up in the 1099-Q.

[KrisD15]

If the college kids do not supply half their own support, someone should be claiming them as dependents.

With that said, since the 1099-Q's are in several names, the TurboTax program will have a hard time doing the math correctly. 

Yes, you can simply not enter the 1099-Q if you can do the math outside of the TurboTax program. That would involve subtracting the amount of the distributions from the amount in Box 1 on the 1098-T if the distributions were used for tuition.

If all the distributions were used for Room and Board, just keep receipts for the room and board with the 1099-Q and there would be no need to alter the 1098-T. 

IRS Pub 970 covers more in detail. 

IRS PUB 970

[rcdmkrok24906]

My children are 21, 19 and 19 so they are filing on their own, we do not claim them.  They use their 529 accounts to pay for college, loans after that once the 529 is exhuasted.  Because of tuition delines I had to pay their account and then get reimbursed from their 529.  This year it will be all in their names.

With that said, I have all receipts for room and board, books, etc.  I will just enter the 1099-T's and hold on to the 1009-Q's.

Thanks!