Q. If a student receives a 1098-T, a 1099-Q, and Zell Miller Scholarships for their undergraduate course, do they need to file taxes on the scholarships if they have no other income?
A. Unlikely, but It depends on the amounts. Zell Miller is usually only for tuition. Scholarships that cover tuition are not taxable.
Q. Can parents include dependent (student) forms (1098-T and 1099-Q) on their tax returns as Turbo Tax is asking?
A. The parents usually claim the tuition credit, on their returns, by entering the 1098-T. But, if the tuition was fully covered by a restricted scholarship (the scholarship must be used for tuition), then there is little they can claim (maybe bobs and a computer). You do not claim the 1099-Q, if it is his name and SS#.
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 don’t need it). 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.
References:
- 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."
- IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
- "IRS Publication 970, Tax Benefits for Education states: If the entire 1099-Q went to qualified expenses, room and board, tuition, etc; then, you do not need to enter the form."
