OMG Please Help...1098-T and 1099-Q question....not the typical ones...Sp21 payment made late ...in 2021!

[confusedrf]

So last year I used TT and with the help of this forum was pretty confident I filed correctly in terms of entering education data for my daughter, 1098T, 1099Q and the Amer Opportunit Credit.

I purchased TT again but have NOT opened or installed it. I fear I may have to return it and get an accountant.

Something bad happened. My daughter's tuition for SP21, was due Dec 18,2020.   Well I had covid and never thought of he bill. Further we got no bill in the mail.  My daughter claims she was emailed nothing either.  We got a friendly reminder from the school and I immediately got my daughter to go on line a print out a copy of the bill. I had her 529 release funds immediately.  BUT......the check was cut 1/7/2021 I believe.  The school gave us no grief and I thought nothing of it until now.

My 1099-Q appears to be missing the sp21 gross distribution...I guess since it was made in 2021 not 2020 like it should have been.  I assume the 1098-T  box 1 payments received are short as well.

MY HEAD IS SPINNING!!

I have no idea the implication of this on any American Opp Credits / refunds this year or next or what the heck will come of this.  Has this happened to anyone?  Were you still able to use TT?  What did you do?  I am freaking out...this stuff was hard to follow to begin with...now it seems I will have issues both this year and next..her last year. 

Calm me down, tell me it will work out...and how!

Thanks TT users!!!!!

[ColeenD3]

Unfortunately, this is  tax law and has nothing to do with the software on which you enter your information. You must have the 1099-Q distribution and the tuition expense in the same year.

To be a qualified distribution, the money must be used to PAY qualified expenses, in the same year as the distribution. So, money paid in 2020 cannot be reimbursed by a 2021 distribution, even though the payment was for a 2020 term.

[confusedrf]

Thanks for the quick response.

RE:

Unfortunately, this is  tax law and has nothing to do with the software on which you enter your information. You must have the 1099-Q distribution and the tuition expense in the same year.

So the bill came 11/2020 for the Spring 2021 semester and should have been **paid in 2020**. Similar to prior years, that would have resulted in the distribution for Spring 2021 reflected with the fall 2020 distribution on the 2020 1099Q. Also I believe it would have resulted in both Fall 2020 and Spring 2021 payments reflected on the 2020 1098T.

Does that make sense? I think this is the pickle I am in.

So  I believe the **2020** 1099Q ONLY really reflects the fall 2020 distribution. Similarly I believe the **2020** 1098T ONLY reflects the fall 2020 payments.  I am checking the latter with the school.

If I am right, for **2021** taxes I will see payments received for Spring 2021, Fall 2021 and Spring 2022 reflected on 2021's 1098T and similar distributions on 2021's 1099Q.

Does this sound right?  If so,   How will it affect my AOC credit?  Will it create some sort of issue with her being considered a FT student in 2020?  Will it create a red flag....I mean the first two years the 1098 & / 1099Q represented 2 semesters. This past year it would represent 1 semester and next year 3 semesters! Surely I can't be the first person this happened to...

Thanks!

RE:

To be a qualified distribution, the money must be used to PAY qualified expenses, in the same year as the distribution.

Well, the 1099T I believe only shows payments received for the Fall semester, not this spring; ie half a year. I am checking. I think they report it this way since the distribution for sp21 was sent to the school in 2021 even though the bill came in Nov 2020. The received th epayment in 2021 so I assume it must  be reported on next year's 1098T.  Again I am checking.

Re:

So, money paid in 2020 cannot be reimbursed by a 2021 distribution, even though the payment was for a 2020 term.

Not sure I follow ...I don'think this is  the situation we are in.

Spring semester is usaully billed and paid in the prior year. SP21 billed and paid in Nov/Dec 2020.

Technically, my late payment resulted in a distribution and payment received in the current year. Billed Nov 2020 but distributed in 2021 and payment received in 2021.

[confusedrf]

The plot  thickens....The 2020 1098-T..I think the payments received may reflect BOTH fall 2020 and spring 2021 semesters...can they do that if the payment for spring 2021 was received in 2021. I emailed the college.  If this is so there will be a situation NEXT year at tax time  when the 1098T reflects 2 semesters but the 1099Q reflects more distribtution...since it will be for 3 semesters...it will look like I overdrew!

I cannot be the only person who paid late and had this happenen!

I will try to clarify this Monday.  

Again  thanks all....

[Hal_Al]

You have three options:

1. You can put the money back (re-contribute) into the 529 plan within 60 days of taking it out.  That counts as a rollover and will not count as a 2021 distribution.

2.  Any expenditures you make in 2021, later in the year, even a December payment for  the  first term of  2022, can be counted for the January 2021 distribution.

3. Technically you can not count it toward 2020 payment of expenses.  Yes, you're not the only one this has happened too.  Some have said they're just gonna do it and hope they can get some sympathy form the IRS in case of an inquiry, especially in this covid period. You (and they) certainly meet the intent of the law, if not the letter of the law.

The 1098-T and 1099-Q are  only  informational documents. The numbers on them are not required to be entered onto your tax return. 

You claim the tuition credit, or report scholarship income, or claim the earnings exclusion from a 529 distribution based on your own financial records, not the 1098-T and/or 1099-Q.

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." 

References:

https://www.forbes.com/sites/josephhurley/2016/02/04/dont-make-these-mistakes-when-reporting-529-pla...

https://www.savingforcollege.com/article/timing-of-529-plan-distributions-must-match-qualified-expen... 

______________________________________________________________________________________

Qualified Tuition Plans  (QTP 529 Plans) Distributions

General Discussion

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.

You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 
Example:
  $10,000 in educational expenses(including room & board)

   -$3000 paid by tax free scholarship***

   -$4000 used to claim the American Opportunity credit

 =$3000 Can be used against the 1099-Q (usually on the student’s return)

Box 1 of the 1099-Q is $5000

Box 2 is $600

3000/5000=60% of the earnings are tax free

60%x600= $360

You have $240 of taxable income (600-360)

**Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  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." 

***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit.

[confusedrf]

Hey all, Thanks. I'll hold off on any more posts until:

1) I print an review Bills from 2018 forward and my 1098T's and 1099Q's from Calendar year 2018 forward.

2) See what the school can tell me as to how they book payments on the 1098T.

I can be wrong but I thought they bill split years, Ex:  Bill Fa20 and sp21 together in fa20 and report the payments for both on the 1098-T for 2020.

Since my payment was late, check written in 2021, I thought they would have to report  those payments for  1098T in tax year 2021. BUT PERHAPS NOT!

Thus the T and Q are out of sync!

The 1099Q seems more straight forward. Its reported in the calendar tax year the distribution was made and I guess it does not matter for what semester  it was, in actuality, meant to cover.

So again, it  feels like I will get the credit this year (tax year 2020) since, in effect, the college is showing my distribution (payments on their end) on 1098T covering fa20 and sp21 AND my 1099Q shows, in reality a distribution that was made for fa20 only.  My T payments will far exceed my Q distributions.

However, what of next year.  The school will again show fa21 and sp22 on the 1098T, but my 1099Q will show the distributions I made for sp21, fa21 and sp22.  They may and likely will be greater than my payments for the 2021 year....no credit!  Further would that somehow become taxable in TT...I have no idea.....

Again, let me look at my bills and see what the school says. Maybe I have this wrong. It just feels like the T and Q forms should work together but the it seems like they may be out of sync.

Sorry if I confused everyone.

[confusedrf]

I printed my bills, T forms and Q forms. I think I am interpreting them correctly..except for the T form scholarship…that seems confusing. See below. I am waiting to hear from the school to try  to determine if my interpretation is correct .

Tax Year 2018:
She started school in fall 2018.
School Billed me for fa18 and sp19 in calendar 2018.
2018 T seems to show Payments received for fa18 and sp19.
2018 T seems to show scholarships awarded for one semester. (fa18 ???)
2018 Q seems to show distributions made for fa18 and sp19.
Turbo tax allowed me the AOC credit.

Tax Year 2019:
School billed for fa19 and sp20 in calendar 2019.
2019 T seems to show payments received for fa19 and sp20.
2019 T seems to show scholarships awarded for 2 semesters. (sp19, fa19????)
2019 Q seems to show distributions made for fa19 and sp20.
Turbo tax allowed me the AOC credit.

Tax Year 2020:

School billed for fa20 and sp21 in calendar 2020.
2020 T seems to show payments received for fa20 and sp21.
2020 T seems to show scholarships awarded for 2 semesters. (sp20 and fa20???)
2020 Q seems to show distributions made for fa20 only.
*My late payment for sp21 (made in 2021 messed up the Q form)
**I think they booked my late payment which they received in 2021 to 2020 on the T form.
*** I think TT will allow the AOC credit.

Tax Year 2021:
School will bill for fa21 and sp22.
2021 T will show payments received for fa21 and sp22.
2021 T will show scholarships awarded for 2 semesters. (sp21 and fa21???)
2021 Q will show distributions made for sp21(my late payment), fa21 and sp22
* I assume TT will not allow the AOC credit.
** Will TT want to tax what appears to be the excess distribution for 3 semesters against payments received on T form for two semesters???

She has now graduated!

What can I should I be doing for calendar tax year 2020 and next year,  2021.

[confusedrf]

FYI, the college's cryptic response was that they report on the 1098T anything from the particular calendar year in question. So for calendar 2020 that would include payments covering Sp20, summer 20 and fall 20.  But that has never really aligned with what the 1099Q shows... which goes by what ever was distributed! In a given calendar year I usually, till this year, distribute the fall semester and the $ for the future spring semester since its billed in the prior year.

Apples and Oranges.  My thoughts last year was this all somehow washed out in the end. There would never be a time when I distributed more in a given year than I had expense for.  My distribution go right to the college. But, by me making the payment late and in the the wrong year, everything is off. It really feels like I am in trouble next year--if not this year too.

Still not sure what to do...debating on opening TT and seeing what happens. Feels like I'll get the credit this year because the the distribution I made (allbeit in Jan 2021) is not reported on this years 1099Q...only one distribution is, for fall whereas the college has 2 semester of payments on their 1098T.

This should not be this complicated!

[MarilynG1]

For 2020, you will be fine as the 1098-T shows Tuition actually paid in 2020.

In 2021, the 1098-T should show the Tuition Paid in 2021 and match your 1099-Q.

If your Qualified Education Expenses exceed your 1099-Q distribution, you don't have to enter the 1099-Q in your return, just keep it for your records.

Click this link for more info on Form 1099-Q. 

[confusedrf]

Thanks MarylinGY,

It felt like apples and oranges based on what the college initially said they report.  But after a few email they said they counted ONE semester's (fall) distribution (payments) on my 1098T and that should correspond to the one distribution I see on the 1099Q. That is not what she originally told me!

So I think I am ok other than normally there are TWO semesters on each form...this year just ONE...and next year THREE I guess!

Anyone think I need to worry about anything else? Otherwise, I'll break the seal and start TurboTaxin'!

[JL_Kosa]

I appreciate this thread.  I'm in a similar situation with Spr21 payment made in Jan21 (per the school's due date), but may have messed up last year for TY2019 as well.  And significant change in tuition & scholarships due to covid.  I'm wondering if I should amend 2019 before filing 2020 to get it all sorted out...  appreciate you reading my details below and giving any input.

TY2019 -

Spr19 son took 4 community college classes

Sum19 son took 2 more classes, 1 at CC, 1 at his new university

Fall19 son was full time at his university, commuting from home, plus had 1 class at CC. He earned 1/2 scholarship, so bills were twice what we had to pay

Paid CC bills & Fall19 univ tuition bill out of pocket, requested 529plan reimbursement just for univ tuition paid.   Didn't request 529 funds for other 2019 expenses because didn't need it, and read articles that there isn't technically a law requiring you to take reimb at same time (law proposed as far back as 2008, but not actually enacted, right?)

Spr20 semester, paid tuition on 12/30/19 on visa to get rewards points.  Paid room & board on Jan 11, 2020 (he only found out they had a room for him on 1/5/20).  Requested reimb for all of Spr20 tuition, room & board in late Jan 2020 so I could pay off that visa by due date.

2019 CommColl 1098T Box1 = tuition paid for Spr19, Sum19, Fall19; no scholarships

2019 univ 1098T Box1 = fall19 total tuition billed + spr20 tuition paid (I think that's the math)  Box 5 shows the scholarship of 1/2 fall19 tuition and Box7 is checked (it incl amounts for Jan-Mar2020)

2019 1099-Q = my reimb request for the Fall19 tuition only, there were earnings over the basis.

In TurboTax for TY2019, me being a noob to this whole area (but a long time TT user), I entered both 1098-T and 1099-Q exactly as is, there was no change to my taxes due.  I didn't even know about AOTC and didn't qualify for it last year anyway due to unexpected 1-time bonus from a company merger.  My expenses on the 1098T were far above what I requested from the 529.

TY2020 -

Recall, Jan2020 - took 529 reimb for the Spr20 semester tuition & room/board, not for books; but apparently paying the bill on visa 12/30/19 doesn't match these together.

Mar2020 - son is sent home due to pandemic, school reimb a portion of room/board

Sum2020 - son took 1 online class, I paid out of pocket, didn't request reimb

Fall2020 - son enrolled full time, classes all remote and happily the univ steeply discounted tuition, scholarship much much lower because tuition was so low for online only classes; paid tuition bill, requested reimb from 529.

Dec2020 - Spr21 bill is issued, but not due until 1/5/21; again steeply discounted tuition, very tiny scholarship.   Son living on campus again for Spr21.  I paid this tuit & room/board bill in Jan2021, and reimb myself from 529 in Jan2021 for all.

2020 1098-T Box1 = approx $500 more than what I reimb myself from 529 in 2020!  I think Box1= remaining Spr2020 tuition billed that was covered by the 1/2 scholarship + Sum20, Fall20, and Spr21 very low tuitions; Box 5 has the large 1/2 tuit scholarship from Spr20 + the small Fall20 scholar; and box7 is checked.   So the Box1-Box5 implies I paid even less since the Spr20 large scholarship is on there.

2020 1099-Q = my reimb requests for spr20, fall20 with earnings above the basis

When I enter these forms as-is into TurboTax, it says I owe tax on 811 of non-qual 529 distributions.  I only got it down that low by putting in room/board from Spr20 in full, plus a "living with parent" room/board # for the fall based on the school's published cost of attendance.

We do qualify for the AOTC this year, but due to the major mess up on the timing of 1098t billing vs my 1099q disbursements, we aren't getting it.

OTOH, if I just leave both of these forms off my return entirely, I owe less since I don't have the 811 of non-qual 529 distribution.  Still don't get the AOTC since 1098 isn't filed.

I'm prob not the only 1st time college parent to screw this up, but I'd like to know if I can do anything to "fix" my situation going forward.   Should I amend TY2019 to flat out remove the 1098t & 1099q?  Would this make it better for me to leave these forms off my TY2020 return?    Sure, I'd like to get the AOTC, but if I can't then so be it.  I've spent way more on QHEE in 2019 &  2020 compared to what I reimbursed from the 529 and I feel that I'm being penalized for timing of payments around 1/1 each year.  

If you've read this far and understand what I'm dealing with, you are a saint.  Appreciate all thoughts.  I've spent about 9hrs trying to figure this out over the past 2 days since finally getting the 1098T from his univ.  If 1098t & 1099q are informational, should I just leave them out this year?

[ReneeM7122]

No, you should not amend your 2019 tax returns in order to remove form 1098-T and 1099-Q from your current tax return.  However we would suggest requesting an offline review of your tax return, so an expert can view your two year comparison and see what's happening.

Here is more information about TurboTax expert reviews.

[JL_Kosa]

Thanks for your reply @ReneeM7122 

I'm using TTBasic on my PC, not online.  How would I arrange an expert review and what is the cost?

[AkinaLO]

To obtain an expert review, you will need a TurboTax Online product. Try reaching out to TurboTax support for assistance with any questions you have while filing your return.

What is the TurboTax phone number?

What is TurboTax Live?