Hi,
Having unsuccessfully spent a lot of time reading and talking to many TurboTax live helpers, I’m hoping the experts I see on this Community will be able to clarify how I can help my daughter work within TurboTax to maximize a tax benefit.
Backgound:
My daughter graduated from college in May of 2020. She lives on her own and pays for more than 50% of her living expenses for this year and will be filing as an independent person. I will not and can not claim her on my taxes.
We have entered the following information into TurboTax:
1099-Q
Box 1 $20,835 Gross Distribution
Box 2 $15,400 Earnings
Box 3 $5,434 Basis
1098-T
Box 1 $24,980 Payments received for qualified tuition and related expenses
Box 5 $10,000 Scholarships
On the the “Here’s Your Education Summary” page, we have entered in the “Other Education Expenses”:
$5,589 for Room & Board
$266 for books
So, the entire Gross Distribution goes to fund the remaining $14,980 of qualified tuition plus the $5,855 for Room & Board and books equal $20,835. The 1099-Q distributions evenly pay her expenses.
Question! How can we, through TurboTax, work with the 1099-Q money to figure out a $4,000 amount to be taxable and thereby allowing my daughter to claim a AOTC credit. Can we draw from the already taxed “basis” amount? What is best and allowable? Penalties? Also, how would I know for sure this is more beneficial and doesn’t have some unforeseen consequence?
This has been such a difficult part of the tax filing for my daughter with wildly different Federal refund numbers coming up dependent on how we’ve entered information, and varying scenarios of not entering 1099-Q (as we’ve seen that on some posts).
We will be very grateful if some of you expert tax people would be so kind as to help us walk through this final piece of her tax return. Thank You in advance!!!
