Brokerage account with my 19 year-old - question about filing taxes, plus 529 complication.

[jschoomer]

Brokerage Question: So my 19 year-old (he turned 19 in 2025) - when he was in 18 in 2024 decided to create his own brokerage account and added me as the joint account owner (Joint WROS). He's in college and he has been investing his pocket money (that I send him) into the market. He has no other income. As a result of this, we have received a 1099 forms with his name first, followed by my name.

1. 1099-DIV (Total ordinary dividends: $556, Qualified dividends:  $420, Section 199A: $19, and Foreign taxes paid: $27)
2. 1099-B (ST Cap Gain: $101, ST Cap Loss: $31, LT Cap Loss: $-870)

Given that he has no other income other than what I send as pocket money, and he's the one transferring it from his bank account to the brokerage, should I be including the joint 1099-DIV and 1099-B as a part of my tax filings so he doesn't need to file taxes, or should he be the only one filing taxes for the joint 1099-DIV and 1099-B, and I don't need to enter these on my filing at all?

529 Complication: We pay for his college expenses using a 529 plan. He is the recipient on the 1099-Q. The problem is that the 529 plan's 1099-Q distribution amount includes his tuition payment for Fall 2024 tuition and Spring 2025 tuition. But the 1098-T from the college only has the Fall 2024 listed.  After I filled out all the information, TT said "Looks like your 1099-Q is taxable. Based on the education expenses you've entered, the student beneficiary must report $11,200 of taxable income from this distribution". How do I tackle this?

Can you please advise the next steps taking into consideration both the events? Thanks in advance.

[AmyC]

1. Your son opened the brokerage account and his name is listed first. He has some passive income and loss.

I assume you are claiming your son as a dependent so this gets a little trickier since the kiddie tax may come into play, which could put his income on your return. See What is the Kiddie Tax?

2. The 529 can be used for room and board in addition to tuition, books, etc. See if you can use up the 529 using 529 for Room and Board. Colleges have budgets for students living off campus. Qualified 529 expenses can include those expenses for a student living off-campus but may not exceed them. For $11,200 you should get most or all that used up -depending on the college figures.

Use any remaining funds against Qualified Education Expenses - Internal Revenue Service.

3. If the 529 is pretty well used up and combined with the passive income, he would be under the filing limit and not required to file a return so you are both off the hook. Double check with this quick quiz by the IRS, Filing requirement - Do I need to file a tax return?

[jschoomer]

Thanks Amy.

I read up on the link. Yes, he's a dependent. Since my son's unearned income is less than $1300, he doesn't need to file taxes at all, correct? He has no other income; of course he does have a capital loss. So if he's not filing, then do I need to include the 1099-DIV and 1099-B in my returns? Just a thought: What if I don't include the 1099-DIV and 1099-B in my returns and he files and the result is that he doesn't owe any taxes. Is that allowed? BTW, it's his SSN that's on the 1099-DIV and 1099-B.

For 529, the total of Fall 2024 room and board qualified expenses are not enough to offset that $11,200. I would need to include the Spring 2025 tuition or room and board. The question is - should all this even be mentioned in my tax returns if his name is on the 1098-T and 1099-Q? Does this make him have to file a tax return to capture this? And what is IRS and TT's answer to ensure that qualified expenses are recorded despite the discrepancy between 1099-Q and 1098-T? Why should we be unfairly taxed for $11,200 if the 1099-Q paid the Spring 2025 tuition in December 2024 but 1098-T from college did not include it because they received the payment in January 2025?

[AmyC]

1. It sounds like he has more unearned income from the Q. You don't need to add it to your return if he is not required to file a return, from the kiddie tax rules 🙂

2. If he isn't required to file, it just goes by. That's why the IRS has limits and points of - it just isn't worth dealing with this small of an amount. He is there.

3. Whoever claims the student claims the 1098-T and the education credit - since he is your dependent and you don't get the credit, you won't need to add the 1098-T.

4. The 1099-Q is in his name and is his responsibility to report income. It is passive- unearned income - which leads me back to the kiddie tax potential. If he meets the limit to file a tax return, then he should file,  Filing requirement.

5. You need a recording of how you went through your calculations to determine where the money went and what is taxable. Keep it with your tax records in case the IRS ever asks. You also have our conversation here.

6. You aren't going to like my answer. It is your fault that you made the payment too late for the December amount to be applied. It is a hard lesson learned. Many  of us make that mistake the first time.

You are doing a great job teaching your son many valuable lessons!