how to manage a mixed 1099-Q

[lbaldo]

I was told previously that as long as all 529 distributions are "qualified" I don't even have to address the distribution in tax return since the distribution goes to the beneficiary.  That's how I did it last year.  This year, I made the mistake of taking out too much so I have to count the unqualified amounts as her taxable income.  When TT asks for the amount, do I have to put in the full amount to match the 1099-Q and then itemize all the educational deductions.  Or, can I just enter the amount that was "unqualified" and have it NOT match the 1099-Q.  The instructions within TT are not clear, and neither are the instructions on the IRS website.  THX

[KrisD15]

The calculation is based on earnings times expenses divided by distribution, so you might enter the 1099-Q and expenses so the program can do the math. 

If you are comfortable doing the calculation on your own, you can just enter the result as the taxable income the student needs to claim. 

There is more information and explanation in IRS Pub 970 page 52

[lbaldo]

Thank you.  Are you saying if I know how much of the distribution is taxable I can just enter it without showing my work?  I don't see an option to do that.  It asks for the gross distribution (which is where my question is) then what portion is earnings and basis.  Thats easy, I just use the same ratio as in the 1099-Q.  So if I know that of the $43k I withdrew, $10k was unqualified, can I just enter the $10k in box 1 and go from there, or should I enter the $43k and then enter all the education deductions?  But then the 1099-Q in turbotax will not match the 1099-Q sent to the IRS.  I don't want to give the IRS more info than I need to but I don't want to do it wrong and trigger an audit. Looking for a definitive answer on what to enter as Gross Distribution i.e. the Full amount or just  the unqualified amount.  Thanks

[lbaldo]

I had a follow up question but the lightbulb came on.  Are you saying the detailed calculations are not submitted with the tax return so I just need to get the correct number on schedule 1?  If so, that is easy.

[AmyC]

The IRS expects your taxable income to be less than the Q when a student is involved.  Yes, it is as easy as @KrisD15 stated. You can just enter the taxable amount for it to go straight to your tax return. The program is trying to be helpful but you are clearly smarter.

Be sure you subtracted all 529 for Room and Board expenses before you determine the taxable amount.