When I enter the 1098-T and 1099-Q of my college dependent who made more than 7000$ last year Turbotax tells me that it looks like 1099-Q is taxable.Followed by that "Student Beneficiary must report xxxx$ of taxable income from this distribution". She has already filed a 1040ez. Any answer is appreciated
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If your Distribution did not exceed your Qualified Education Expenses then you don't have to enter the information from 1099-Q at all.
If the Distribution doesn’t exceed the amount of the student's qualifying expenses , then the distribution is not Taxable and you don't have to report any of the distribution on your tax return . I understand that this sounds strange, especially regarding taxes, but the IRS does not request any additional information to substantiate whether or not your Distribution exceeded your actual qualified expenses. Nevertheless it would be wise to keep a good record of these expenses just in case your return gets picked up for examination.
To correct this issue simply remove the information from the 1099-Q, or if you like, TurboTax allows you to substantiate this information by countering the amount from the Distribution by entering Education expenses. You can find the Education Expenses Section under Deductions and Credits. This is where you enter the qualified education expenses you paid with the 529 distribution. Make sure you follow all the way through this interview.
(If you don't complete the Education Expenses & Scholarships interview in Deductions and Credits,then the interest amount of the 1099-Q will be included in taxable income.)
Please feel free to post any additional details or questions in the comment section.If your Distribution did not exceed your Qualified Education Expenses then you don't have to enter the information from 1099-Q at all.
If the Distribution doesn’t exceed the amount of the student's qualifying expenses , then the distribution is not Taxable and you don't have to report any of the distribution on your tax return . I understand that this sounds strange, especially regarding taxes, but the IRS does not request any additional information to substantiate whether or not your Distribution exceeded your actual qualified expenses. Nevertheless it would be wise to keep a good record of these expenses just in case your return gets picked up for examination.
To correct this issue simply remove the information from the 1099-Q, or if you like, TurboTax allows you to substantiate this information by countering the amount from the Distribution by entering Education expenses. You can find the Education Expenses Section under Deductions and Credits. This is where you enter the qualified education expenses you paid with the 529 distribution. Make sure you follow all the way through this interview.
(If you don't complete the Education Expenses & Scholarships interview in Deductions and Credits,then the interest amount of the 1099-Q will be included in taxable income.)
Please feel free to post any additional details or questions in the comment section.My son's expenses exceeded his distributions from his 529, but what I found is that I am still being charged some taxes even though I entered both 1099-Q distributions and 1098-T qualifying expenses to show this was the case. It seems like it is best to follow the recommendation to just leave the 1099-Q out altogether when you know and can prove your college expenses exceeded your 529 distributions for the year.
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