Have three 1099 s for custodial accounts. How do I not pay tax on these? They are set up with the children's SS#'s. Do I ignore the 1099 s?

[DexterS · Accepted solution]

1099s are always reported on the return based upon the Social Security number.

You may ignore these documents as long as the children do not have enough income to be required to file a tax return.

See the screen shot below to determine if the children must file:

[stevemoody10422]

The Grandchildren do not need to file a tax return. Therefore I will ignore them. No SSN appears on the 1099's although my wife is the Custodian Etrade has her SSN as well as the Grandchildren's SSN's. Anything else I need to ask you concerning this subject?

[stevemoody10422]

Also there was no screen shot below or I can't figure out how to find it.

[VolvoGirl]

Sorry the original question above and answers are from a long time ago, not just June.  They came over from the old Turbo Tax Forum and all got entered with a June date.  They might be several years old.  And none of the screen shots from the old forum came over.

[stevemoody10422]

What do I need to do to get current responses responses to my questions?

[Hal_Al]

You should ask a fresh question, rather than tag on to an old one.

On the other hand, the simple answer to your question is: each child must a file a tax return if they have more than $1050 of total income.

If the child's  only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on the parent's (not the grandparent-custodian) return, using form 8814. In TurboTax, enter at Less common income / Child's income.

All 1099s have the recipient's SS# on them.  Look again to see if the child or the grandparent is the "recipient" of the income. 

[Leila1942]

As I understand - You can withdraw funds from a custodial account for educational purposes - tax free.

Grandchildren withdrew funds from the custodial account - used to pay college tuition.

How the grandchildren report this on their tax return.    1099 from Charles Schwab shows the withdrawal.        How do I deduct use for tax-deferred college tuition on tax return - and withdrawal not subject to taxes.

thanks for help

[Hal_Al]

Q.  As I understand - You can withdraw funds from a custodial account for educational purposes - tax free.

A.  That is generally true. 

The actual withdrawal of money, from the account, is not taxable.  What is taxable is the interest, dividends and capital gains distributions,  paid from the account during the year.   Also taxable, are the capital gains realized when stocks, bonds and mutual fund shares (securities) are sold, to generate cash for  the withdrawal of money. 

Q. How the grandchildren report this on their tax return?   1099 from Charles Schwab shows the withdrawal.     A. No, the 1099 does not show "the withdrawal".  A 1099-Div shows dividends and maybe capital gains distributions.  A 1099-INT shows interest.  A 1099-B shows gross proceeds from the sale of securities which will result in a capital gain (or loss).  Each 1099 is entered in it's designated place in TurboTax*.

Q. How do I deduct use for tax-deferred college tuition on tax return - and withdrawal not subject to taxes.

A. You don't. That's not how it works.  Everything on a 1099 is income and is taxable. 

*In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in  Home & Business)

 - Wages & Income

Scroll down to:

  - Wages and Salaries

-Interest & Dividends

  -Interest on a 1099-INT

  - Dividends on a 1099-DIV

-Investment Income

   -Stocks, mutual funds, Bonds, Other 

[DaveF1006]

 If the 1099Q distributions were used to strictly pay for educational expenses, do not report this. Instead, report the expenses from the 1098T to receive the educational credit.

@Leila1942