I have read some of the questions and answers on 1099Q/1099T but I am still confused, so hoping someone here could help.
I am claiming my first-year college daughter as a dependent on my tax return. Everything seems fine until I enter the 2 1099Qs (I have 2 of them because there was a transfer of the company that handles the 529 account between my daughter 1st and 2nd semester payment). My daughter does have some scholarship for her first year college, in case that matters. Here are the 2 1099-Q numbers:
First:
[1] Gross Distribution $21,391
[2] Earnings $6,312.73
[3] Basis $15,078.27
Second:
[1] Gross Distribution $21,618
[2] Earnings $6,385.77
[3] Basis $15,232.23
When I entered the first 1099Q, Turbo Tax says
"Looks like your 1099-Q is taxable.
Based on the education expenses you've entered, the student beneficiary must report $5,654 of taxable income from this distribution."
Similar dialog (with different amount) for the second one.
Like others, my own refund number did not change after that message.
So I took that as I need to also file a separate tax return for my daughter, despite me claiming her as dependent. She has no other income (no W2, etc). But when I did that, she now owes $4,741 on her own return. Note TT says she can't enter the 1098T since I claimed that already.
Folks think I may be doing this wrong.
Questions:
(1) Given what TurboTax's message say the beneficiary must report her income, can I pay that in my return, or must I create a new return for my daughter?
(2) Does my daughter need to file her own return anyway because adding the two box 2 "Earnings" amount above, it goes above $12,550?
(3) Reading some answers, it sounds like sometimes 1099Q do not need to be entered. But what situations should we entered them then? I want to pay the right amount of taxes. Like the other guy, I really do not want to be audited.
Thanks very much for you help in advance,
EY
