I cannot enter form 1098 t since it says I earned over $180k. This makes no sense since I need to offset the 1099q 529 $

[Carl]

If you have more than $90K earned income if filing single, or $180K of earned income if filing joint, then you don't qualify for "ANY" education credits what-so-ever. Therefore, you have no need to enter anything in the Education section of the program at all, unless you have any 529 distributions.

since I need to offset the 1099q 529

Now you will have to enter that income, as it's perfectly possible that you "MAY" (or may not) have to pay tax on that distribution because of your earnings being over the threshold. Weather or not you pay tax on it depends on many factors, including what that distribution was used for. I'm not sure, but if the 529 funds were "not" used for the qualified expenses of tuition, books and lab fees, but were instead used for room & board, then I *think* you won't have to pay taxes on it. It's also possible I got that backwards. So enter it both ways to see which is better for you tax-wise.

[Hal_Al]

If the 1099-Q goes on your return, enter it before you enter the 1098-T. The interview process goes smoother.  Enter at Deductions & Credits/Education/ ESA and 529 Qualified Tuition Programs (or type> 1099-Q <in the search box).

Alternatively; you can just not report the 1099-Q, at all (or the 1098-T), 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, in case of an IRS inquiry.

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." 

[lumeistertt]

What do you end up doing for your tax?

I want to know since I am now in the same situation as yours.

[Hal_Al]

@lumeistertt 

The above replies apply in your case too.

In, particular, you can just not report the 1099-Q, at all (or the 1098-T), if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. 

[Hal_Al]

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." 

[lumeistertt]

Thank you Hal_Al for your advice.

I think in this case, Turbo Tax has created a major mistake with this filing because Turbo Tax adds 529 distribution as income to the filers and that increases the tax that filers have to pay.

[Carl]

Turbo Tax has created a major mistake with this filing because Turbo Tax adds 529 distribution as income to the filers and that increases the tax that filers have to pay.

When you have a 1099-Q it is *IMPERATIVE* that you work through the Education section the way it is designed and intended to be used. If you do not, then chances are extremely high that you will *NOT* be asked for room and board expenses. Therefore the 1099-Q funds that were "in fact" used for room and board expenses will *NOT* be deducted from taxable income and you *WILL* pay taxes on that 1099-Q distribution.

Now if the 1099-Q is the same or less than the qualified education expenses of tuition, books, and lab fees, then you don't need to enter that 1099-Q at all. But keep it along with a written explanation of why you did not enter it, just in case the IRS questions this 2-3 years down the road.

Generally, if there is an audit at all, then paper audits by mail occur anywhere from 24 to 36 months after a filed tax return has been completely processed by the IRS. So keep notes of your decisions and why you made them so you can explain to the IRS should the need arise.