Let's look as sources and uses as i don't think we have the complete picture. It is easier since there is no AOTC involved and i assume that is because your income is greater than $160,000.
The sources are $20k to your daughter / college and $14k to you
The uses were the $20k (net of Box 1 and Box 5) on the 1098T form
so we need to identify another $14k of uses.
1. It seems that so long as I can justify my 1099-Q proceeds are justified by QEE, that no entries need to be made on either my or daughter's tax return- correct? YES and we need another $14k to do that
2. Would the 1099-Q issued in my name automatically trigger an inquiry by the IRS? Or should I dissuade an inquiry by providing the IRS with a supporting statement or worksheet? And if so, mechanically how do I do this in TT Premier Desktop? it doesn't get reported in any event. it is not required by the IRS - it's the way they roll.
3. I understand that if student lives off campus, the avg. room and board charge published by the College can be used. What if off campus room and board was of higher cost? You are limited by the lower of the actual cost or what the college publishes. See IRS Publication 970, page 58, item 3 on the left side of the page. This stops someone from staying in a 5 star hotel for the entire semester, eating steak and lobster via room service every night and claiming it as a qualified expense for the 529 distribution!!!!!!
a. Would IRS allow it? What about deposits made to secure the following year's lease? a deposit is not an expense.it can be an expense later if it is forfeited
b. If I completed the TT Smart worksheets, is the program sensitive enough to know that amount published for each school (would seem unlikely, right?)
4. For future years, if I don't actually claim daughter as a dependent ( I get no tax benefit from it, due to my income level), can she claim the AOTC as long as I don't use 529 funds for amounts claimed for AOTC?
Thank you so much in advance for taking the time to read and respond. while you certainly have the right not to claim your child, the child has a different dilemma (the IRS is deviously smart!) It will ask the student CAN SHE be a dependent of another, not IS SHE a dependent of another. Since she CAN BE, she isn't eligible for AOTC herself.
