1099-Q Distribution Transfer

aldoalbanese — Sat, 01 Jun 2019 07:52:12 GMT

I have an education form 1099-Q, I'm filing my daughter under my taxes but she will need to files her taxes as well since she made some income. What is confusing me is that after entering the info I get to a "Distribution Transfer" question, did you roll over or transfer all or part of this distribution within 60 days to another qualified tuition program? What does it mean? is the tuition program the school that she is going to where I'm paying with the 509 program? If I answer yes, I have another question, "Rollover" did you roll over within 12 months prior to this rollover? What it is referring to?

Thanks for your help.

If the Distribution doesn’t exceed the amount of the stud...

JaimeG — Sat, 01 Jun 2019 07:52:14 GMT

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.

Quite simply you don't have to enter any of the information from 1099-Q unless:

If the Distribution exceeds these expenses, then you must report the earnings on the excess as "other income" on your tax return. Additionally When a student’s school expenses are paid with these funds, you cannot claim a tuition deduction or either of the educational tax credits for the same expense.
If the Qualified Education Expenses exceed the amount of the distribution the American Opportunity Credit can still be applied, if the student qualifies.

One other issue that can come up with Coverdell and 529 Plans is when the Account Owner instead of the Beneficiary receives the 1099-Q. If the box on the 1099-Q that states "Check if the recipient is not designated beneficiary" is checked sometimes the IRS' computers calculate a deficiency and automatically assess penalties and interest. This is easily solved with proper communication of the situation with the IRS but nevertheless it does take time. The best way to avoid this situation is to have the distribution paid directly to the school or to the Beneficiary. This will create a 1099-Q in the name of the beneficiary instead of the account owner and keep the super-duper computers at the IRS at bay.

topic 1099-Q Distribution Transfer in Retirement tax questions

1099-Q Distribution Transfer

If the Distribution doesn’t exceed the amount of the stud...