Son is Full Time Student with No Income, Only 1099-Q with 100% covered expenses - Does he even need to File Tax return for Federal or CA State?

[TShoe]

My son is a second year undergrad student who received a 1099-Q this year in his name from Oregon 529.  We live in California, and he is going to UC Santa Cruz.  He has no income from any source.  The entire amount taken in 529 distribution as reported on 1099-Q is more than covered by qualified expenses (Tuition, room/board, books).  Does he even need to file tax return with Fed or State?  Can we just do the worksheet, file the receipts, and be done with this?

[Hal_Al · Accepted solution]

Q.  Son is Full Time Student with No Income, Only 1099-Q with 100% covered expenses - Does he even need to File Tax return for Federal or CA State?

A. No.

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. 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip! 

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." 

[KrisD15]

Yes

since the distribution was used for education expenses, 

and if the student did not receive excess scholarship, 

and unless you want to try to apply for a credit (by having the student claim scholarship and/or distribution) 

there is not need to report the 1099-Q. 

If the student does not need to file for any other reason, there would be no filing required.