I am having a difficult time getting Turbotax to not put a 10% penalty on my daughter's 529 withdrawal that is based on a scholarship.
Here is the situation:
- 1099Q in name of daughter, full-time college student
- Daughter is my dependent, but filing her own tax return as she has earned income, dividends, and 1099Q.
- I do not qualify for any education credits (income too high).
- Kiddie tax applies.
1099Q specifics:
- $7,000 rollover to her Roth (529 is overfunded), so I am moving money into her Roth. She has earned income of $8,859. 529 has been in place more than 15 years.
- 1099Q shows the Roth transfer correctly as a "trustee to trustee" transfer
- $46,086.92 of other 529 distributions (some to school, others to her for off campus room/board and scholarship)
1098T
- Box 1 $19,695
- Box 5 $16,500
Education expenses (paid by 529)
- Paid direct to school: $13,681
- Room/board paid to offset daugter expenses: $17,744.84
- Scholarship distribution: 14,661.08
My questions:
- Where does 1098T go...on my return or daughter's? I don't qualify for any education credits as income is above cut-off.
- For 1099Q, do I just ignore the rollover to Roth? That is what I have done so far.
- For other 1099Q components, I have tried the straightforward approach and followed TT interview and I have tried the "workaround" with saying student is not the 1099Q beneficiary and then entering her as student, filled in expenses and scholarship manually. Either way, TT only uses ~11K of the scholarship to avoid the 10% penalty. I need help on how to enter correctly.
Thanks in advance. Let me know if more information is needed from my side.
