Your annuity distribution will be reported to you on a 1099-R. Note that while the hardship was a reason the payer allowed the distribution, it doesn't exempt it from taxes.
According to the IRS, there is an exception from the 10% premature distribution penalty when for using the distribution from an IRA to pay for higher education. However, this is unfortunately only for IRA distributions. Annuities and 401k distributions, do not qualify for this exception.
Using any money, however, for qualified tuition expenses should get you a generous education credit for the first $4,000 spent on undergraduate tuition. (Instructions below)
In the future, you may consider borrowing the money from your employer's retirement
plan. You receive the money to use as you want—you don’t have to pay taxes or penalties on it.
Putting that money back into your plan account also doesn’t involve paying
additional taxes. You’re just repaying money you borrowed.
To
enter pension and annuity Payments (1099-R)
• Click
on Federal Taxes (Personal using Home and Business)
• Click
on Wages and Income (Personal Income using Home and Business)
• Click
on I'll choose what I work on (if shown)
• Scroll
down to Retirement Plans and Social Security
• On
IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update
button
For the tuition credit: Schools
must send their students a 1098-T form to report the amount of qualified
education expenses paid by the student during the year. This form is extremely
important because the information it reports is vital to calculating many of
the educational tax benefits the IRS offers, such as the American opportunity
credit, the lifetime learning credit and the tuition and fees deduction.
There
are many credits for education. TurboTax will help you pick the best one for
your situation:
1.
Open (continue) your return in TurboTax, if it's not already open.
2.
In the search box, search for 1098-T or 1098T (lower-case
works also) and then click the "Jump to" link in the search
results.
3.
Answer Yes to Do you want to enter your higher
education expenses?
o
If you land on the Let's estimate how much you could get this year,
click Skip this.
o
If you land on the Your Education Expenses Summary screen,
first select Edit next to an existing student or
select Add a new one before proceeding.
4.
Answer any questions that follow. After a few screens, you'll be asked if you
received a 1098-T. Answer Yes and click Continue.
5.
Enter your Form 1098-T exactly as you see it, even if you think it's
wrong. Here are some important tips:
o
If any boxes on your 1098-T are blank, leave them blank. Don't
enter 0 (this may cause errors later).
o
If boxes 1 or 2 on your 1098-T form are wrong, enter those amounts anyway. Then
click What if this is not what I paid? right below box 2 and
enter the correct amount of tuition paid.
o
Don't include grants not already listed in Box 5. We'll ask about those later.
6.
Click Continue when you're done entering the information from
your 1098-T. Answer any additional questions on the following screens.
