We received a 1099-Q and so did our daughter. Our distributions did not exceed the expenses of her school. Do either she or we need to report the 1099-Q info on either tax return? She also received a 1098-T tuition statement. If we do not report the 1099-Q, do we then not report the 1098-T?
You should enter both in TurboTax exactly as printed on the paper form. TurboTax will ensure that you don't pay tax on the distribution AND don't take credit for tuition expenses paid with a 529 plan.
The recipient listed on Form 1099-Q should report the distribution on his or her tax return. If the listed recipient is another member of your family, the distribution must be reported on that person's tax return rather than on your return.
For a qualified tuition program (QTP or Section 529 Plan), the beneficiary should be listed as the recipient only if the distribution is made:
· directly to the designated beneficiary, or
· to an eligible educational institution for the benefit of the designated beneficiary.
Otherwise, the account owner should be listed as the recipient of the distribution.
To enter the 1099-Q:
1. Open (continue) your return in TurboTax.
2. In the search box, search for 1099-Q (upper- or lower-case, with or without the dash) and then click the "Jump to" link in the search results.
3. On the Form 1099-Q screen, click Continue and follow the onscreen instructions.
Here's some other info you may find helpful:
If you contribute money to a qualified tuition program, such as a 529 plan or a Coverdell ESA, you will likely receive an IRS Form 1099-Q in each year you make withdrawals to pay school expenses of the beneficiary. The 1099-Q reports the total of all withdrawals you make during the year; however, some of this amount may be taxable depending on how you spend the money.
The 1099-Q provides three key pieces of information. Box 1 reports your annual distributions or withdrawals from the account. The second box reports the portion of the distribution that represents the income or earnings of your initial investment. Finally, box 3 reports your basis in the distribution. Essentially, this is the amount of your distribution that relates to original contributions you make to the account.
The form also includes information on the type of account you own and amounts, if any, that you transfer between two qualified tuition plans.
Calculating taxable amount
If the distribution doesn’t exceed the amount of the student's qualifying expenses, then you don't have to report any of the distribution as income on your tax return. If the distribution exceeds these expenses, then you must report the earnings on the excess as "other income" on your tax return. When you pay a student’s school expenses with these funds, you cannot claim a tuition deduction or either of the educational tax credits for the same expense.
If the student is not required to file a return, then the student would not report the 1099-Q.
See Do I Need to File a Tax Return? for guidance on whether your student must file.
There is no separate requirement to report Form 1099-Q; it only gets reported if the distribution exceeds qualifying expenses and then only if the resulting income meets the threshold for requiring a return.
As @MichaelDC states above, if the distribution doesn’t exceed the amount of the student's qualifying expenses, then you don't have to report any of the distribution as income on your tax return. If the distribution exceeds these expenses, then you must report the earnings on the excess as "other income" on your tax return. Unless the "other income" amount meets the filing threshold for the student, there is no requirement to file a return.
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