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paul18
New Member

How do I enter 1099-Q information when there are 2 beneficiaries, one of whom withdrew funds for ineligible use?

As recipient of 1099-Q with 2 beneficiaries I want to know how to enter the gross distribution, earnings and cost shown on the form when 1 of the recipients withdrew from school and used the funds withdrawn for ineligible purposes?

3 Replies
JaimeG
New Member

How do I enter 1099-Q information when there are 2 beneficiaries, one of whom withdrew funds for ineligible use?

Did you receive a 1099-Q for each account or is it stacked into one form?
pjzoukis
New Member

How do I enter 1099-Q information when there are 2 beneficiaries, one of whom withdrew funds for ineligible use?

It's stacked in one form... I actually know the basis and gain for each underlying account
JaimeG
New Member

How do I enter 1099-Q information when there are 2 beneficiaries, one of whom withdrew funds for ineligible use?

Your situation is quite unique. It is clear that you are the recipient of the distributions from both accounts, this is why there is only one 1099-Q.

In TurboTax you will not be able to allocate funds from that single 1099-Q. Nevertheless, this creates an accounting scenario that is going to lead to the proper Tax Scenario. The accounting comes into play with the Qualified Education Expenses. Since you are the recipient of the distribution you are responsible for properly allocating the Qualified Education Expenses, dollar for dollar, to the distribution. The first step is determining what Qualified Education Expenses are for purposes of 529 Plans and Coverdell ESA:

  • Tuition and fees;
  • Books, supplies and equipment; Computers and Software
  • Room and board expenses for students enrolled at least half-time only to the extent they are not more than the greater of
    • The allowance for room and board included in the cost of attendance for federal financial aid purposes, or
    • The actual amount charged if the student resides in housing owned or operated by the eligible education institution; and
  • Expenses for special needs services required by a special needs beneficiary and incurred in connection with enrollment or attendance.

Once you have accounted for all of these expenses you will first enter the information in this order:

  1. 1099-Q
  2. Both 1098-T
  3. Education Expenses (TurboTax will take you to this screen after entering 1099-Q)

Since you are the recipient of the distribution if the amount of Qualified Education Expenses for both of your children exceeded the amount of the distribution, none of it will be taxable. Now, if your children had each been the recipients of their distribution (you would have received 2 1099-Q forms), TurboTax would have required that you specifically allocate education expenses to offset each 1099-Q.

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