Who reports the 1099Q?

[squeezil1]

My daughter is the recipient of a distribution from a 529 Plan owned by my father (her grandfather). The 1099-Q was sent to her and displays the last four of her SSN.

Who reports the distribution for tax purposes:  my father (grandfather/owner of the 529), my daughter (the beneficiary, but who has nothing else to report on a tax return), or me (because she's already listed as my dependent) ?  Thanks for your help.

[ToddL]

Edited 02/10/2017 at 10:04 AM PT.

The person who receives the funds (whose SSN is on the 1099-Q ) has to report the Form 1099-Q on their tax return (If the money went straight to the school, it is treated as going to the student).

You can enter the Form 1099-Q in either the Wages & Income section  or the Deductions & Credits section  of Federal Taxes, 

(If entering in Wages & Income, the Coverdell ESA and 529 qualified tuition plans interview is found under Less Common Income > Miscellaneous Income).

(If entering in Deductions and Credits, the  ESA and 529 qualified tuitions interview is found under Education). 

If the beneficiary is listed as a dependent on this tax return , you will have to complete the Education Expenses interview, including entering the Form 1098-T.

If the beneficiary is not listed as a dependent on this tax return (e.g. grandchild), you will have a screen to enter information about that student and their expenses. Unlike the Education Expenses interview, you can enter Room and Board costs (see attached screenshot). 

[squeezil1]

Thank you.  I have a few follow-up points & questions:

1)  She has never filed a tax return because she has no income
2)  The Earnings on the distribution from the 529 Plan were less than $22 (per the 1099-Q)
3)  In light of these two points, do I still need to create a new tax return for her in TurboTax so that she can complete the Education Expenses & Scholarships interview?
4) Alternatively, can she complete that interview in my tax return because she's still my dependent, the amount of Earnings is so small, and has nothing else to report?
5)  We've not received a Form 1098-T.  Should we be expecting one, and who would issue it (would it come from the University?)

Thanks again.

[ToddL]

You should receive the 1098-T from the university sometime in early February. If that is her only income, there is no need for her to file a tax return. - the threshold income for her to file a return is $1050.

[ToddL]

Since a dependent is unable to claim their own exemption, a tax return is necessary when their earned income is more than the standard deduction for a single taxpayer, which in 2016 is $6,300. However, the threshold decreases to more than $1,050 when the dependent's income is unearned, such as from dividends and interest.

[ToddL]

Since she is not required to file a return and report the interest, you don't need to include the 1099-Q in your return. You should just complete the Education Expense interview with 1098-T on your return.

[Mochina]

TutboTaxToddL, I want to make sure I understand your initial response to the question asked.  If 529 money went straight to my college son's school, my son must complete the Educational Expenses and Scholarships interview as part of his tax return.  For the 529 money that we as parents received to cover miscellaneous educational expenses on his behalf, we should complete the Educational Expenses and Scholarships interview on our joint tax return.  Correct?

If this understanding is correct, your answer makes sense, but appears to contradict a response found at https:/ttlc.intuit.com/questions/2854185.  That response included the following:
"Here’s the general rules gisted from IRS Publication 970
 at <a rel="nofollow" target="_blank" href="http://www.irs.gov/pub/irs-pdf/p970.pdf">http://www.irs.gov/pub/irs-pdf/p970.pdf</a>

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited
 institution and:

Is enrolled as at least a half time student for one
 academic semester that begins during the tax year, (each institution has their
 own definition of a half time student) and:

the student's parents provide more that 50% of the
 student's support (schollarships/grants received by the student do not count as
 the student providing their own support)

Then:

The parents will claim the student as a dependent on the
 parent's tax return and:

The parents will claim all schollarships, grants, tuition
 payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that
 qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent,
 then:

The student must select the option for "I can be
 claimed on someone else's return", on the student's tax return. The
 student must select this option even if the parent's qualify to claim the
 student as a dependent, and the parents do not claim them."

Would you please explain further?  Thanks!

[ToddL]

Not sure what contradicts my guidance. Whoever the 1099-Q is issued to must report that 1099-Q on their tax return. If it goes to the child and the parents are claiming that child as a dependent, the child can still report the 1099-Q and offsetting educational expenses. The 1098-T is reported on the return where the child is claimed as dependent.

[Mochina]

The https:/ttlc.intuit.com/questions/2854185 response doesn't seem to make a distinction based on whoever the 1099-Q is issued to. To quote again, "The parents will claim all schollarships, grants, tuition
payments, and the student's 1098-T on the parent's tax return..."  It doesn't appear that the student has to deal with this at all when filing his/her tax return.  However, you say that if the 529 payment for tuition, etc. went directly to the school, the student is considered the recipient.

[squeezil1]

TutboTaxToddL - as the original poster, I'd like to thank you for the info and wanted to confirm one final point:  in our scenario, no one reports the 1099-Q on a tax return, correct?  Neither my daughter, her grandfather (who owned the 529 account), nor me.  Please let me know if that understanding is correct.

[ToddL]

The 1099-Q must be reported on your daughter's tax return since the 1099-Q was sent to her and displays the last four of her SSN. She can still file a return and note that she can and will be claimed as a dependent on another return (yours). If she doesn't have any income, her standard deduction will "wipe out" the 529 interest income, i.e. no tax. If she doesn't file and report the 1099-Q, the IRS may or may not send her a notice asking for a tax payment -  this will depend  on the amount of interest income on the 1099-Q, i

[squeezil1]

Thanks again.  I created a TurboTax return for my daughter and it shows she owes $2 in federal tax.  I'd like to provide a few more details from our scenario to see if it affects your guidance:

My daughter is currently a senior in high school, and the $500 from the 529 plan was a deposit to confirm her planned enrollment in college this Fall.  I believe using 529 funds for this purpose is a qualified expense and should not be taxable.  Perhaps it was a mistake to send the money in the final days of 2016 (because she wasn't actually enrolled yet), but we were trying to meet the university's early January 2017 deadline to receive payment.  In regard to the $2 tax (not a significant amount, but as a matter of primciple), does that information affect your guidance in any way?

[ToddL]

I understand. Technically a deposit would not be a qualified education expense, because it is not an "expense". It will be included in her 2017 Form 1098-T as an expense when tuition is billed/paid.

[ToddL]

Irritating as it may be, she should file and pay the $2 tax.

[ToddL]

(Have to say that)