Can someone answer this 1099Q / 1098T question...it seems to be a common issue..that confuses all...PLESE HELP!!!

[jlar]

@confused - yeah I think we ran a lot of people off in this thread! 

I still think you are good to go with the way you describe it. She is under the standard deduction on income so if TT is adding the 1099Q to her income its just not visible to tax (ie under the 12,200). 

-Loans - again, and as @NCperson said...don't think about the payments, think about 'what was paid for'. Sounds like you are square on that...and getting your AOTC $.

-Room and Board for commuters. This sounds like it could be the next doctoral thesis for some brainiack. Above my pay grade and probably something to avoid unless we can find better software that helps walk us through or we get a definitive ruling from an authority. 

[jlar]

@Carl LOL... I never said I completely understood this...but I'm trying!

Yes, the 529 went straight to the school. So yes, its part of Box 1 on the 1099-T I guess. It's the money that 'we paid', regardless of 529 or cash. Her first year I paid all with cash and all that showed up in box 1 (along with the scholarship she gets from the school).

A lot of people have said "Don't enter the 1099Q at all". Then I here people say - a number one red flag to the IRS is when you don't report all the forms you receive.

But I'll stop there. So now what? So the 1099-Q is embedded in the 1099-T that I enter into my form?

Thanks for any clarity you can provide.

[NCperson]

yes

[Carl]

So yes, its part of Box 1 on the 1099-T I guess. So the 1099-Q is embedded in the 1099-T?

Yes. That's generally true if the money was paid directly out of the 529 account to the school. But don't guess on this. You need to know it for a provable fact. (It sounds like you're not sure, and you need to "know")

Have the student log in to their online college account and go to their financials section. They can do a detailed printout there. A few things about that printout.

Remember, schools work in academic years, the IRS works in calendar years. For this particular thing, you don't care where the money was applied. You only care the *date* money was acknowledged as received.

So add up everything received by the school in 2019. This will include scholarships, grants, 529 funds and money you paid out of pocket. 

If the total received by the school in 2019 is the same as box 1 of the 1098T and the list of received income includes the 529 funds, then you will *NOT* enter the 1098-Q at all, anywhere, on any tax return. Otherwise, the beneficiary recipient would be double-dipping and that *will* generate a paper audit-by-mail.

Now sometimes the math won't "seem" to work for reasons I really don't want to go into here, as it will just add to the confusion That's okay. The important thing is, if the 529 distribution paid directly to the school appears as a separate line item on the financial printout, then it "is" included in the 1098-T box 1 without a doubt.

[confusedrf]

Want to have fun, try tying your college’s bills out to all this!

At this point I think I decided its best to assume the T and Q form as are the bible. Yes you may have additional expenses not reflected therein. Ex: Books you bought or rented on Amazon and put on your credit card. Or that check you wrote the community college when your dependent took a course away from their main institution that you also put on your credit card. Or maybe if your dependent commutes, room and board...wait lets not go back there again!!!

No I am thinking I’ll put the T and Q in. If I get the AOC great. I not quite...then we are back to where/how to enter the books, room and board etc....Errrrr. That's not my case this year.

So I think that’s the best approach, if after doing that you get audited, I guess you just grab all your paper work and receipts from your filing cabinet and send to the IRS to figure out.  Once they do...MAKE SURE THEY EXPLAIN IT. 

Next if you owe $$$, sue turbo tax. Better yet write a book: HOW TO ENTER 1098T, 1099Q AND RELATED EXPENSES WITHOUT JUMPING OUT A WINDOW...then hire an accountant so you need not do this ever again and finally sell the logic involved to TT.

AAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!

[jlar]

@Carl - Thank you

The only reason I'm 'not sure' is because the math seems slightly off: On 1098-T, the Box 1 24215 minus box 5 16650 = 7565. My distribution from the 529 was $7590. I don't know why there is a $25 difference. Beyond that, I am 100% certain that the $7590 went directly to the school.

Update - turns out there was an adjustment in late 2019 due to a course that she withdrew from. That caused the box1 -box 5 to be $25 less than the 1099Q amount.

I will get with the college to see if I can get that print out and verify (and to have it for my records).

If what you are saying is indeed correct, that the 1099Q is embedded in the 1099T Box 1 (as it seems to be), AND, that including the 1099T in this manner constitutes correct reporting of the 1099Q....THEN, I could agree with the whole proposition that reporting the 1099Q separately is NOT REQUIRED.

One more thought - it would be nice if TurboTax helped us on this. On the student form it clearly asks - "Did you receive a 1099Q in your name". When you enter YES and put in the numbers you end up with what appears like over taxation. For us, its a $923 negative swing - which is enough to warrant digging in to this!

The trouble here seems to be with the claiming of the AOTC on the parent form (via the 1098T) and then when trying to report the 1099Q on the student form there is no way to use the 1098T (stranded/remaining tuition) on the student form. 'Double dipping' rules and 'exception' language just adds to the confusion.

[jlar]

@confusedrf  - thank you for providing me a good laugh. I really needed that!

I don't think you got hit with the extra taxes and penalties from entering the 1099Q that I'm getting. It's almost $1000 extra tax.  Again, TurboTax could be more clear I think...

So maybe it's back to "Don't report the 1099Q" anywhere! And maybe there's some wisdom in that simplicity. I used 529 dollars exclusively for paying for college tuition. There should be no penalties or extra tax on that. PERIOD. It's this dang AOTC and the 'fear of double dipping' that is confusing things I think.

[Carl]

So, looks like you're doing everything possible to continue to confuse yourself. Keep it up, and you'll think yourself right into the asylum. 🙂

I am 100% certain that the $7590 went directly to the school.

That's not what is in question here. What's in question is, are you 100% certain the 529 distribution that went to the school, is included in box 5 of the 1098-T?

With only a $25 difference, Assuming you see the 529 distribution as a separate line item on the student's financial printout, I'm 100% certain it's included in box 5 of the 1098-T, based on your math.

Box 5 of the 1098-T only includes income received by the school from third party sources. Third party sources would income scholarships, grants, and anything else the school received *directly* from a 3rd party.

So if the 529 was paid directly to the school by the 529 plan administrator, that would be 3rd party income to the school, as far as the school is concerned since neither you or the student never had control of that money, or even laid a physical finger on that money before the school got it.

Whereas box 1 of the 1098-T is the amount paid to the school from "all" sources, including the amount in box 5.

Since box 5 is smaller than box 1, if you subtract box 5 from box 1, the difference is what was paid in cash by you and/or the student. That cash payment amount is what was paid to the school "out of pocket" and that amount is what will qualify you for the AOTC any any other education tax breaks you may qualify for.

[Carl]

I used 529 dollars exclusively for paying for college tuition.

Generally, if the check issued by the 529 plan administrator is made payable to the school, then it's included in box 5 of the 1098-T.

Whereas if the check is made payable to the beneficiary recipient, then it's not in box 5. But here's where it gets sticky sometimes.

Sometimes the plan administrator will make the check payable to the beneficiary recipient, yet mails the check directly to the school.  Upon receiving the check, the school calls in the beneficiary recipient to simply endorse the check so the school can deposit it into their account.  Schools wil handle this explicit scenario one of two ways, and either way is correct.

 - The school will consider the 529 payment as a cash payment directly from the student. Therefore it will *not* be included in box 5 of the 1098-T. In this case, the 1099-Q is entered into the tax return.

 - The school will consider the 529 payment as from a third party; from the 529 plan directly. Therefore it *will* be included in box 5 of the 1098-T. In this case, the 1099-Q will not be entered anywhere on any tax return.

[jlar]

Box 5 shows only her scholarship from the school - 16,650

The 529 distribution is only represented in Box 1.

Neither her nor I endorsed a check from the 529 plan.

[jlar]

@Carl 

I reached out to the college to discuss the 1098T and looked on line at her statements.

Here is what I found. The difference between Box 1 and Box 5 is $7565. That is the amount I paid on 1/10/2020 for the Spring semester. This is not on the 'tax year' 2019 1099Q because it was distributed in 2020.

The $7590, paid directly to the school on 8/13/2019 is what is on the 1099Q. 

If the 1098 is supposed to represent 'academic year', then both 7565 + 7590 should be reflected on line 1. 

If the 1098 is supposed to represent 'tax year', then Box 1 is still wrong and should have included the 7590 and not the 7565.

Box 5 still is only showing her academic scholarship of 16650.

If what you stated prior is true, that the Box 5 should INCLUDE the 529...and then my box 1 minus box 5 would be zero. Would I loose my ability to claim the AOTC? 

Or, to change the question..."Does paying for college using a 529 distribution still allow you to qualify for the AOTC".

[jlar]

This is just too much. I'm booking a local appointment with an accountant. Thanks to all and good luck. Bye bye tax return! 

[NCperson]

@jlar 

1) I can see no reason why the distribution from the 529 could be in Box 5 of the 1098-T.  MOST of that money from the 529 is YOUR after-tax money and for it to be reported on BOX 5 of the 1098-T would telegraph it is potentially new income to the student - illogical since it was mostly your after tax money to begin with.  Let's leave that rabbit hole be.

2) the 1098-T is based on calendar year - that is how the IRS works. It doesn't work on school year.  

3) I suspect the $25 difference on the 1098-T Box 1 entry is because there is probably a $25 fee that is not a qualified expense.   Tuition and all 'related fees' are eligible.  the definition of 'related fees"  is on page 14 of publication 970,

 Related expenses. Student activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution.

So for example if there is a $25 parking fee, that is not a required fee, so it would not be in Box 1. 

4) what is eligible for AOTC is the tuition and related fees LESS scholarships. Again see the chart on page 13.  So if the tuition and related fees is totally covered by scholarship, you can't 'double dip' and use those same tuition fees to claim the AOTC credit. 

about AOTC and 529 plan - your eligibility for AOTC has nothing to do with the 529 (other than 'double dipping'),   See the chart of eligibility on page 13 of publication 970.  You are going to take advantage of AOTC first because obtaining that $2500 credit is a great trade for paying taxes on a portion of the 1099Q  / Box 2 earnings.  If you covered off the 1099Q first and then use the remaining dollars to attribute to the AOTC credit, you'd be giving up a lot of the credit dollars just to say you avoided paying any tax on the 1099Q / box 2 earnings - a bad trade! - and your student may not be paying income taxes at all!!!!!

[Carl]

If the 1098 is supposed to represent 'academic year'

That's where your thinking is flawed. The 1098-T reflects only those transactions that occurred in the "calendar" year. Period. End of story. What tax year that transaction was "for" flat out does not matter.

If the 1098 is supposed to represent 'tax year', then Box 1 is still wrong and should have included the 7590 and not the 7565.

No, it's not wrong. The $25 difference is what was paid to the school *in 2019* "AFTER" the 1098-T was printed. That's why you enter the 1098-T exactly as printed. Followup screens after that 1098-T entry screen will ask you for things that were not included on the 1098-T.

Box 5 still is only showing her academic scholarship of 16650.

So are you saying box 5 does "NOT" include the 529 distribution? Earlier you seem to indicate that it does. Now you're insinuating that it does not.

At this point, you have confused yourself beyond help. May I suggest you put this aside until tomorrow and just forget about it completely? Then when you come back to your tax return, start the education section from scratch, as if it's the first time in  your life you've ever dealt with this stuff.

Then, if you need assistance, post a "NEW" message in this forum and start from scratch, and do not mention or even "think" about anything you've dealt with previously. Right now, this thread is so screwed up, I'm in hopes a moderator will just archive it or delete it. It's gotten beyond ridiculous and is definitely of no help to anyone else reading it.

[Hal_Al]

@jlar 

Q. **Can i enter a 1099Q line 2c "Adjusted Qualified Higher Education Expenses applied" amount on my daughters federal return to 'transfer' the amount of 1098-T qualified expenses entered (on my/parent return) and 'stranded' (i.e. in excess of the $4000 AOTC qualification)...plus other qualified costs, such as books, Room and Board, etc.

A.  Yes. In fact, that is the way it should be done. 

But once you calculate that none of the 1099-Q is taxable, either on your return or the student's, NOTHING is sent to the IRS.  Whether you do all that work or just don't enter the 1099-Ql; you have the exact same risk of being audited by the IRS.  Even if the calculation determines that some of it is taxable, only the taxable amount is entered on Schedule 1 (line 8); none of the calculations are sent to the IRS.