QUESTION1: Should the withdrawal be directed to my DS (the "beneficiary) and then does the resulting 1099-Q from this withdrawal get reported on DS' tax return?
ANSWER 1: Simple answer: it doesn't matter if it's all used for qualified Expenses, including room and board, since none of it is taxable income. If a small amount of it is going to be taxable, the dependent student is usually in a lower tax bracket than the parent. But, the kiddie tax could kick in, with higher amounts, as taxable earnings are not earned income. The only way to be sure is calculate both ways.
QUESTION2: Is it important from whose account the OOP money comes from, if the parent claims AOTC and the student receives scholarship and 529 funds (as the beneficiary)?
ANSWER2: No. Although in taxes, the general rule is YOU must pay it to deduct/claim it, there is an exception for educational expenses. One unlikely scenario: if he pays too much of his own support, he might not qualify as your dependent. Scholarships, 529 and prepay plans are NOT considered support provided by the student.
QUESTION3: as above, if this 529 "reimbursement" goes directly to DS "beneficiary", does the 1099Q go on his tax return; do I make any note of it on my return?
ANSWER3: Yes, it goes on his return. You make no note on your tax return, but do adjust the expenses you claim (don't double dip). Again, he does not need to report it if was all used for qualified expenses.
QUESTION4: the question of receipts for off-campus food expenditures appears all over internet forums. There are "authoritative voices" on both sides of that one. I think you have to be able to show that you "incurred" that expense, but looking at Pub. 970 it appears that as long as you're below the amount of "BOARD" for the on-campus / cost-of-attendance meal plan cost this amount is qualified as long as you're enrolled >1/2 time and withdraw taken in same calendar year as the claimed expense. It does not mention receipts; I am pushing son to try to keep as many as he can though it is clear that we won't account for 100% of his food spending. Are receipts necessary?
ANSWER4: Probably not. But, as you already determined, there's not a clear answer out there. Most people (including me) are hanging their hat on the IRS will accept the school's cost-of-attendance meal plan cost.
