Need I report RESP distribution(EAP) as income?

[luol2016]

Get NR4 form, need I report it as income in 1040?

[JulieS]

Yes, you are required to report your worldwide income on your US tax return.

The US government does not recognize the tax deferred status of a Registered Education Savings Plan, so distributions are taxable.

The first step is to convert the CAD to USD, using the average currency exchange rates. Click here to find your rate.

Form NR4 is reported as interest income. 

1. Open your return and select Federal on the left side menu.
2. Select Wages and Income toward the upper left.
3. Scroll down, or expand the list and find Interest and Dividends.
4. Expand that section and find Interest on 1099-INT.
5. Click on Add/ Edit to the right.
6. Select, I'll type it in myself, and click Continue.
7. For Received from, enter the name of the investment or the company.
8. Enter the amount and click continue. 
9. Answer the next question No.

The RESP distribution needs to be reported as Other Income.

1. Select Federal on the left side menu.
2. Select Income and Expenses toward upper left.
3. Expand/ scroll down the list and find the section called, Less Common Income.
4. Scroll all the way down and select Miscellaneous Income, 1099-A, 1099-C.
5. Select Other reportable income.
6. Answer the first question Yes.
7. Enter RESP distribution as the description and amount on this page, click Continue. 
8. Click through the rest of the section and finish your return. 

[luol2016]

Thanks for your reply.

We're RESP grantor, my son is beneficiary. He cashed out money from account for university education. NR4 is issued for him with 15% tax withholding.

My question is if my son needs report EAP in his 1040.

We report RESP income in annual return. When my son receives distribution (EAP), tax is already paid by us. Need he report it as income again for tax?

I find one RBC document, could you help to clarify it?

Where someone else is a subscriber and/or contributor to
the RESP, and the RESP is a foreign grantor trust in respect
of such persons (as discussed earlier), a U.S. beneficiary
is not subject to U.S. income tax when they receive a
distribution from the RESP, provided the necessary U.S. tax
filings have been made.

https://ca.rbcwealthmanagement.com/docu ... c407a6943d  

[RobertB4444]

If the NR4 is issued to him then yes, he will need to report it oon his return.  But he is also entitled to education credits for the University that he is paying for with the money from the NR4.  Hopefully they wipe each other out.

[luol2016]

Yesterday I get the info "You report any amount greater than your education expenses as income."

My son studies in state university, tuition is higher than the amount in EAP NR4.

We pay tuition for my son, claim him as dependent and report 1098-T in our tax return.

How does my son report NR4, could you give a detail guide?

[luol2016]

If RESP EAP is grant/scholarship, it should be tax-free for tuition, no need to include in 1040.

Please check if my understanding is correct.  

https://www.irs.gov/taxtopics/tc421

Tax-Free

If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free. Scholarships, fellowship grants, and other grants are tax-free if you meet the following conditions:

• You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
• The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

Taxable

You must include in gross income:

• Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
• Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don't need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.

How to Report

Generally, you report any portion of a scholarship, a fellowship grant, or other grant that you must include in gross income as follows:

• If filing Form 1040 or Form 1040-SR, include the taxable portion in the total amount reported on the "Wages, salaries, tips" line of your tax return. If the taxable amount wasn't reported on Form W-2, enter "SCH" along with the taxable amount in the space to the left of the "Wages, salaries, tips" line.
• If filing Form 1040-NR, report the taxable amount on the "Scholarship and fellowship grants" line.