First year dealing with 1098-T & 1099-Q and should have asked for distribution in student (beneficiary) name to simplify tax reporting. Need to sort out who should file what. Does student file the 1098-T and parent file the 1099-Q (or something else)?
When parent (529 owner) filled out Turbotax, there was a pop-up with instructions how to report this as Turbotax indicated student had taxable income. I cannot find that pop-up and even going through the interview again, it does not pop-up.
Background info:
1098-T reported tuition and educational expenses ~$12,000 (box 1) with scholarship ~$7,040 (box 5) in student's name/SSN.
1099-Q reported $10,000 (box 1) distribution roughly 55-45 basis-earnings in parent (owner) name/SSN.
Remaining tuition and educational expense after scholarship is $4,960 ($12,000 - $7,040).
529 distribution not covering 1098-T tuition and educational expense is then $5,040 ($10,000 - $4,960), so is taxable.
However, room & board was $11,000 which more than covers the $5,040 remaining 529 distribution, so the $5,040 is no longer is taxable.
Parent is not eligible to claim any educational credits due to income and no tax benefit for claiming student as a dependent also due to income.
Student (single taxpayer) has minor earned income <$2,000 and unearned income <$100. However, if not claimed as a dependent on parent return, student can qualify for AOC credit ($50).
Based on this background, it appears the student should file as a dependent that will NOT be claimed by someone else (parent) and include the 1098-T in their return. Parent should not claim student as a dependent and file 1099-Q (as they were recipient, not beneficiary) in their return. Is this the best way to handle it?
Note: both 1098-T and 1099-Q both state information is being provided to the IRS. However, other community questions have been answered that the 1099-Q is not required to be filed.
