Let's start fresh and begin with the 1099-Q. Is there a way to manipulate room and board and maybe some tuition to use up the whole thing? If so, delete your entry and tuck it into your tax folder. IRS Publication 970, Tax Benefits for Education states:
If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.
You received a college tuition refund, does that include money from 529 or could that be from scholarships or other? If it was definitely 529, did you immediately deposit the money back into the 529? Yes, you are supposed to immediately add it back to the 529, otherwise, it is income and taxable. Which is why I am trying to find a way to make it money used for living expenses -if possible. See 529 for Room and Board.
You say the 529 is over QEE so I will believe you. When you enter the 529, you also enter the AQEE - adjusted QEE - remember to subtract the refund from QEE. The program can figure out the difference and make it taxable. IRS Pub 970 states: Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return.
The 529 only goes on one return. Not knowing more, I suggest this article Guide to IRS Form 1099-Q: Payments from Qualified Education Programs. It sounds like you know it is the student return.
You mentioned scholarship income as well. We like to make it taxable and give the parents an education credit when possible. The IRS has a great brochure that explains how scholarships and tax credits interact.
Not knowing more about the income received, you may need to deal with the kiddie tax. Here are scholarship income facts:
- Scholarship income is a hybrid of earned income and unearned income.
- Earned income for purposes of the filing requirement - Single $12,950
- Earned income for the dependent standard deduction is earned income + $400
- Unearned income for purposes of the kiddie tax and other
It sounds like your student may have $2500 of unearned income. See What is the Kiddie Tax?
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