I closed my daughter's (she is 4 yrs old) college plan in 2021 and rolled over money to UTMA account.
As result 1099-Q was received. As far as I understand I have to pay income tax on earnings. Box 2 on the form earnings has few hundred dollars. When I go to 1099-Q on turbotax.com here is what's happening:
1. First question: Who's shown as the Recipient on your 1099-Q.
- I select "One of these dependents: Name (age 4)" because she is the actual recipient on 1099-Q
2. Next question: Who is the student
- I select "This distribution was not used to pay any education expenses"
3. I get a page with this message: "Great news! You don't need to report this form. It looks like 1099-Q won't affect your taxes, so you can just skip this step. We'll take the form of your return"
QUESTION:
Is this expected? Why software does not allow me to proceed since money was used for non-educational expenses and there are some earnings in box 2. Plus as far as I understand I need to pay10% penalty? Thanks in advance for any assistance.
