How does the student account for a taxable 529 distribution on his/her tax return, when the parent enters the 1099-Q and 1098-T into TurboTax?
Each year, my student receives a scholarship for about $10,000. This year, we will withdraw a taxable $10,000 from the 529 plan to pay for other expenses. The $10K is offset by the scholarship, so its earnings will be taxable but not penalized.
I'm the parent and the trustee on the 529. I pay the college bills. Each semester, we have a 529 check sent to the student to cover the expenses, which he signs over to me, thus ensuring the 1099-Q names him. I enter the 1098-T and the 1099-Q in TurboTax, and TT calculates the taxes. My student has never filed a tax return.
I plan to file my TTax as I always have, entering both the 1099-Q and the 1098-T. I know from experience, TTax will alert me that the earnings on the $10K are taxable to the student. I think I'm clear about how *I* file this.
How does the *student* file this? Does he re-enter the 1099-Q and the 1098-T. That sounds bad. Somehow he's got to break out the principal and the earnings, since only the earnings are taxable.
