This is a bit of the twist to the original questions as I’m using TurboTax Online to also complete the student’s return.
How is this info entered for the student’s tax return for 1098T and 1099Q. I’ve stepped through the 1099Q interview and entered the info two different ways. One way results in the penalty tax being generated and the other is no tax due. I’m wondering if I need to outsmart TT online interview?
One of the questions in the 1099Q interview asks:
Who is the student? “Tell us the student whose education expenses were paid with the distribution reported on your 1099Q”
Answer Choices:
1. Student’s name (the tax return I’m doing and the person listed on 1099Q)
2. Someone else not listed
3. This distribution was not used to pay any education expenses
If I answer the #1 student’s name, no tax is due…but technically, this is a scholarship withdrawal to match a portion of the tax-free assistance they received. We didn’t take the distribution $$ for expenses, but TT is matching up the distribution to other education expenses for books, computer, software, etc. and I’d like to see how the calculations were accomplished, so I know its correct. The number generated for schedule 1, line 8z makes no sense. Also need to figure out if Form 5329 is generated (where can I see it?)
If I answer, #3-this distribution wasn’t used for any education expenses (which seems to be the “truth”), then TT online is generating a 10% penalty on the 529 scholarship withdrawal. Doesn’t seem correct that I’d owe $424 federal tax on $988 of taxable income. Thank you for any and all assistance. I thought I had this ready to go, but want to be sure it all makes sense before I file.
