topic 1099Q distribution in Education

1099Q distribution

Chanson — Wed, 26 Feb 2020 20:21:11 GMT

Grandchildren decided not to go to college. I paid the basis in post tax dollars. It looks as though I am paying taxes on the gross distribution, not the earnings. Is this right?

Re: 1099Q distribution

Carl — Wed, 26 Feb 2020 20:38:17 GMT

Are you the named beneficiary on the 1099-Q? (Is your SSN in box Recipient's TIN box?)

If no to the above, does the named recipient qualify to be claimed as your dependent, and are you "in fact" claiming them as your dependent?

Re: 1099Q distribution

MinhT1 — Wed, 26 Feb 2020 20:41:55 GMT

If you used your 1099-Q distribution for non-qualified expenses, you have to pay income tax and a 10% penalty on the earnings only, not the gross distribution.

Please revisit the entry of your form 1099-Q and make sure that you have entered everything correctly.

Re: 1099Q distribution

NCperson — Wed, 26 Feb 2020 20:42:54 GMT

you are paying tax on BOX 2 only......(earnings)

as you mention, Box 3 was your aftertax contributions to begin with,

Re: 1099Q distribution

Chanson — Thu, 27 Feb 2020 14:52:46 GMT

TurboTax entered the gross distribution in income. Will it deduct the basis later?

Re: 1099Q distribution

NCperson — Fri, 28 Feb 2020 00:08:01 GMT

it doesn't work like that.

Let's say Box 1 = $20,000 and Box 2 = $2,000 and box 3 = $18,000.

As you simply withdrew the $20,000 and kept it, as your grandchildren didn't go to college, you should see income of $2,000 on your return; Box 2 only. There will be a 10% penalty for taking money out that was not for college.

where do you see it entered $20,000 as part of gross income? what form and what line?

Re: 1099Q distribution

Hal_Al — Fri, 28 Feb 2020 03:18:12 GMT

The entry error is most likely at the 1099-Q screen