"Q. **Can i enter a 1099Q line 2c "Adjusted Qualified Higher Education Expenses applied" amount on my daughters federal return to 'transfer' the amount of 1098-T qualified expenses entered (on my/parent return) and 'stranded' (i.e. in excess of the $4000 AOTC qualification)...plus other qualified costs, such as books, Room and Board, etc.
***A. Yes. In fact, that is the way it should be done.
But once you calculate that none of the 1099-Q is taxable, either on your return or the student's, NOTHING is sent to the IRS. Whether you do all that work or just don't enter the 1099-Q; you have the exact same risk of being audited by the IRS. Even if the calculation determines that some of it is taxable, only the taxable amount is entered on Schedule 1 (line 8); none of the calculations are sent to the IRS. "
@confusedrf - you paid 18k net after scholarships. 18k - 4k AOTC = 14k left to cover the 529. That is more than enough to net out the 11k 529 distribution. If you do enter the 1099Q on her return, use the technique to enter 14,000 in line 2c as above. That zeros out any taxes and/or penalties. If what others are saying is true, TT won't even include the 1099Q to the IRS. And that is where the whole "don't include the 1099Q on the return" seems to be coming from...and it seems legit, when justified, to avoid this nightmare.
In my case, I still feel like I have some exposure on my daughters return unless I get into the questionable Room and Board while living at home thing. I may be better off NOT reporting the 1099Q on my daughters return and then submit documentation and rationales to the agency if they come knocking. But that will be for my accountant to advise on.
I did figure out why my numbers were off by $25...my daughter dropped a class late in 2019 and there was a fee adjustment for that. All else is correct.
Sincerest thanks to NC and Hal - you rock! @confusedrf , listen to NC and Hal - I have enjoyed your humor!
