1099T and 1099Q

[goldbeda]

We (and a grandparent) paid our daughter's tuition directly to the college from our (i.e., the parents and grandparents) respective 529 plans so she received (in her name) two 1099Qs.  She also received a 1099T from the school. The total of the Qs is more than the T.  I'm not sure why this is the case because the funds from the 529 were used to pay the college bill in its entirety (which includes tuition, dining, accommodation etc.), all of which are qualified expenses to the best of my knowledge, so I'm not sure what the T is excluding. In any event, that's not my question...

The question is, when my daughter entered the Qs on her tax return, TT made the entire amount taxable, leaving her with a hefty tax bill.  I then tried to add the T, hoping it would offset the Qs but I got a message saying she couldn't add the T because she was being claimed as a dependent. (She is a dependent on my tax return but I take the standard exemption so I don't know if she's officially being claimed or not.)

So I did some googling and I read that as long as all the expenses paid with the 529 are eligible expenses (as noted above, I think they all are) then it is not necessary to enter the Qs onto the beneficiary's tax return.  So we removed it.

So neither the Qs nor the T were entered on anyone's return.

Please tell me this is right!

[KrisD15]

It could be right. 

If the amount of the distributions on the 1099-Q forms plus the amount of scholarships on form 1098-T box 5 matches (is as much or less than) the amount on Form 1098-T box 1 (tuition and fees) plus room and board, the expenses would offset the taxability of the distributions and scholarships. 

In this case, nothing needs to be reported, nothing needs to be entered in the TurboTax programs

HOWEVER 

please be aware that sometimes there an option for the Taxpayer that claims the student to claim an education credit if the student can claim some of the distribution. Usually the tax on the distribution is less than the amount of the credit. 

IRS Pub 970 explains how this might be possible 

[goldbeda]

Thank you.  

I went back and looked and I actually did include her 1098T on my return but it seemed to make no difference to my overall tax situation. The 1098T seems to include pretty much only tuition (its a few hundred dollars over for reasons I don't know) but we used the 529 proceeds to pay the entire bill (which includes food, accommodation etc.). 

So it sounds like we're ok not including the Q on her return as long as the disbursements were for qualified expenses?

Thanks again, 

[Hal_Al]

It's unusual that you wouldn't be seeing a $2500 (at least $1000) education credit (in two pieces) on your tax return, for entering her 1098-T, if you are you eligible for the credit (income under $90K; $180K married filing jointly)

Provide the following info for more specific help:

• Box 1 of the 1098-T
• box 5 of the 1098-T
• Any other scholarships not shown in box 5
• Does box 5 include any of the 529/ESA plan payments (it should not)
• Is any of the Scholarship restricted; i.e. it must be used for tuition
• Box 1 of the 1099-Q on your 529 distribution
• Box 2 of the 1099-Q
• Box 1 of the 1099-Q on grandparent 529 distribution
• Box 2 of the 1099-Q
• Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
• Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
• How much taxable income does the student have, from what sources
• Are you eligible for the credit (income under $90K; $180K married filing jointly)
• Is the student an undergrad or grad student?
• Is the student a degree candidate attending school half time or more?