It depends. For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the 1099-Q can be either the owner or the beneficiary depending on where the money was sent. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient".
The 1099-Q gets reported on the recipient's
return. The recipient's name & SSN will be on the 1099-Q.
Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.
You can and should claim the tuition
credit before claiming the 529 plan earnings exclusion. The educational
expenses he claims for the 1099-Q should be reduced by the amount of
educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit, that gets him an exclusion from the taxability of the earnings (interest) on the QTP. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (not yours), but not the penalty.
Total qualified expenses
(including room & board) less amounts paid by scholarship less amounts used
to claim the Tuition credit equals the amount you can use to claim the earnings
exclusion on the 1099-Q.
$10,000 in educational expenses(including room & board)
-$3000 paid by tax free scholarship
-$4000 used to claim the American Opportunity credit
=$3000 Can be used against the 1099-Q (usually on the student’s return)
Box 1 of the 1099-Q is $5000
Box 2 is $600
3000/5000=60% of the earnings are tax free
You (or he) have $240 of taxable income (600-360)
You enter the 1098-Q; then you enter the 1098-T. Tutbotax will automatically claim the tuition credit first. To verify this, Go through the education section again. When you get to the screen that says “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it.
I filed my taxes already. I decided to file my tuition this year for the first time. I used my 1098-T from the university and entered the amount from box 1 ($2512.70). This brought my return up to $3,115, stating that I would be receiving about $2100 in federal credits. I recently received a 1099-Q from my Florida prepaid tuition plan. Do I need to amend my submitted tax return when I get my refund? I do not want to be penalized next year for this mistake. Thank you
I have a couple questions about this topic also. i hope it is ok to post them here.
Our family received a 1098-T under my son name and he is in college. We also received a 1099-Q under my name. I am filing income tax for my son (single status) and us (me and my wife as join status). Next year I will try to have the 529 money send to my son's school instead of our account so the1099-Q will have his name on it and everything will be file on his return.
Here are questions:
1. How do we correctly file these forms on our returns (my son return and my return) this year?
2. I believe there is a income limitation for claiming the tuition credit and our income is over that so I can put those form on my son return for this year even though 1099Q is under my name and 1098-T is under his name. This way the tuition credit is more advantageous for him instead of us ?
You can enter the 1098-T and 1099-Q on your son's return to see if any of the education plan distributions are taxable. Your son cannot qualify for an education credit if he is listed on your tax return as your dependent.
You enter the forms in the Deductions and Credits section of TurboTax, and then Education, and then ESA and 529 qualified tuition programs (For 1099-Q) and Expenses and Scholarships (Form 1098-T).
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If your son is your dependent, and he did not provide more than half of his own support, you need to claim your son as a dependent. Did your son earn any income? How old is he? Still under 24?
It depends on the facts and circumstances to determine whether he can file an independent return.
Yes he lived with us and we provided everything for him.
He earned around $13K of income last year.
He is 21 years old, between sophomore and junior in college full time and drives to a nearby college (15 minutes).
I don't want to cause you more confusion, but I do want to clarify some of the information you received.
The 1099-Q must be reported on the return of the social security number on the 1099-Q. You indicated that the 1099-Q is in your name so I assume it is in your social security number. Only you can claim the 1099-Q, however, you do not have to report the 1099-Q.
As for the 1098T, if you are claiming your son on your taxes, then you can claim the 1098-T. Your son cannot claim the education credit if you are claiming him on your return.
To report the 1098-T and the 1099-Q correct, the amount in Box 1 of the 1098-T is the payments received for qualified tuition and related expenses. Box 5 are scholarships and grants received by the student. The scholarship amount in Box 5 is subtracted from the amount in Box 1, The is the amount of tuition/expenses that the 529 Plan funds would be applied. When TurboTax is apply the 529 Plan funds it is only looking at the tuition/expenses. Room and board, transportation, and meals are not used in calculating the Adjusted Qualified Higher Education Expenses applied when compared to the distribution from the 529 Plans funds.
Funds distributed from a 529 Plan, will be reported by the bank on a Form 1099-Q. The 1099-Q is sent to the owner/recipient of the 529 Plan funds. The Form 1099-Q is to be reported as income if they were not used to pay qualified college tuition/expenses. If the amount reported on the 1099-Q were used to cover qualified college tuition/expenses you do not need to report the income. If the amount exceeds the amount of college tuition/ expenses then the excess needs to be reported as other income on your 1040.
After applying the 529 Plan funds there is still a balance of tuition/expenses, then this amount is used to determine the amount of education credit. On the other hand, if the amount of scholarships in Box 5 and the 529 Plan Funds exceed the total qualified tuition/expenses in Box 1, then this amount is reported as income on the return.
You won't need to report the 1099-Q if the amount of Box 1 of the 1098-T is more than the amount in Box5 and the balance remaining is equal to or more than the amount of the 1099-Q you do not need to report the 1099-Q but keep the documentation with your tax papers. However, if this is the case you cannot claim the education credit. In order to claim the education credit your Box 1 amount after deducting scholarships/ grants and taking into consideration the amount of 1099-Q, there is no excess tuition remaining, you cannot claim the 1099-Q.
Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip! When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry. On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
In summary, add up all of the qualifying education expenses. You cannot use room and board and other expenses for the education credit. It is the tuition only. You want to see if there are enough expenses for room and board along with books and other required supplies, that are equal to or exceed the amount of your 529 distribution shown on the 1099-Q. If this is the case, then you do not have to report the 1099-Q. In this case, you would enter the 1098-T on your return and see if you qualify for the education credit. This eligibility will depend on your MAGI and the amount of tuition paid. Note: If Box 5 is more than Box 1, you will not receive a credit and may end up with an entry of other income in the amount of the difference which is taxable.