" She was technically the recipient of all the money".
For tax purposes, it doesn't work that way. The 1099-Q was sent to you (the owner), so if any of it is taxable, it goes on your return, because you are the recipient. Note your name in the box titled "RECIPIENT’S name".
"My daughter is my dependent - but she files her own taxes - including her education expenses".
As a dependent, she cannot claim an education credit. The only times she would "file her education" on her taxes would be to report taxable scholarship or taxable 529 distribution.
Q. How do we pay the taxes on that missing $4879?
A. Report it on your return. Answer you, not someone else, when asked who the recipient is. If you want it on her return, in the future, have the plan send the money to her (the beneficiary), or her school, not to you (the owner). You're allowed to do that.
Why do think the 529 distribution is taxable? See my 2nd reply for a full 529 distribution discussion. There may be better ways to do this.
Provide the following info for more specific help:
- Box 1 of the 1098-T
- box 5 of the 1098-T
- Any other scholarships not shown in box 5
- Does box 5 include any of the 529/ESA plan payments (it should not)
- Is any of the Scholarship restricted; i.e. it must be used for tuition
- Box 1 of her 1099-Q
- Box 2 of her 1099-Q
- Box 1 of your 1099-Q
- Box 2 of your 1099-Q
- Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
- Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
- How much taxable income does the student have, from what sources
- Are you trying to claim the tuition credit (are you eligible)?
- Is the student an undergrad or grad student?
- Is the student a degree candidate attending school half time or more?
