Retirement tax questions

If your Distribution did not exceed your Qualified Education Expenses then you don't have to enter the information from 1099-Q at all.  But if it did, read on for an explanation about what might trigger taxability after entering the 1099-Q.

 

For most qualified education program beneficiaries, the amounts reported on the 1099-Q aren’t reported on a tax return. However, if annual distributions exceed your adjusted qualified education expenses, you may need to report some of the earnings reported in box 2 as income on your tax return and pay an additional 10 percent tax on it as well. Your adjusted expenses are equal to the total of your qualified education expenses minus other tax-free assistance you receive, such as scholarships and Pell grants. For example, suppose your qualified education expenses are $10,000, you receive a $2,000 Pell grant and boxes 1 and 2 of your 1099-Q report a gross distribution of $8,000 and earnings of $1,000.

 

Box 1 of your 1099-Q will report the total distribution from your education program for the year, regardless of whether the funds are sent directly to the school. Box 2 reports the portion of the distribution that represents account earnings, while Box 3 reports the portion representing the original contribution to the account. In other words, the amount reported in Box 3 must equal Box 1 minus Box 2.

 

In some cases, your 1099-Q may include the fair market value of the account. Boxes 4 through 6 provide additional information, but they have no impact on whether some of your distributions are reportable on a tax return.

 

Enter your 1099-Q first, then enter all Education Expenses, including books and room and board, if applicable.  

Here is a TurboTax article that discusses the 1099-Q.