Even the Live Tax Advice was not able to explain this to me.
My daughter is my dependent and I claim her as such on my taxes.
She filed her own taxes because she works.
She got a 1099-Q with her as the Recipient and filed that and the College 1098-T.
On HER 1099-Q she has
Box 1 - 33689
Box 2 Earnings 11551
Box 3 Basis 22128
Her 1098-T shows
Box 1 Tuition 58525
Box 5 Scholarship 37000
She is NOT claiming education credit - and she ended up having to pay small amount of Kiddie Tax because she took out a bit more than the qualified expense (58425-37000 = $21425) so tax based on $12255 excess. So far so good...
Now to MY return
I also took money out of the 529 Plan...
My 1099-Q listing for me shows
Box 1 39098
Box 2 Earnings 13186
Box 3 Basis 25912
I spend some of that Money paying for qualified Expenses for my daugher.
$3110 Went to pay another college sommer class we have a 1098-T from
$18910 was spent paying Room and Board to the First college that my daughter submitted for
and $907 on a new Computer.
So the Total of Qualified expenses are $22927.
So I end up with 39098-22927 = 16161 in Excess distributions. And TT calculates my taxable part to be $5454.
I am fine with that. I am NOT claiming any educational credits - I earn to much.
But here is the problem. For me TT wants to add a 10 percent penalty on the $5454.
But because my daughter received $37000 in Scholarships - There is supposed to be an exception to the rule... Anyone is allowed to take out up to the scholarship amount without penalty.
I have no idea how to get TT to understand that she got that scholarship.
If I enter the 1098-T as is from her college - the numbers gets messed up.
Right now I faked the 1098-T for her college.
I told Turbotax the Actual Tuition paid was $37000 and in box 5 $37000 - that results in the Tuition expense being a total of 0 on the worksheets - but it honors the scholarship during the 10 percent penalty calculation.
I am afraid running into problems because now the 1098-T does not match what was sent to us - but is it wrong???
