1099-Q

[rgore13]

I'm the parent of a college student and I that took a distribution of 10,000.00 from my Maryland 529 plan.  The 10,000.00 was used for the beneficiary's college tuition in 2019.  If I enter the 1099-Q distribution of 10,000.00 using me as the recipient my tax refund is 5,418.00 but if I use my college daughter (beneficiary) as the recipient my tax refund is 6,819.00.   Do I need to enter the 1099-Q data in my tax return?  The difference is 1,401.00 so it does not make sense I would lose 1,401.00 by using a college savings plan I set up for my Childs college education.

Pleas advise -

Thanks,

[NCperson]

it is confusing.......and you can't 'double dip'

1) the 1098-T needs to go on YOUR return as along as a) the student is a dependent and b) Box 1 EXCEEDS Box 5 (otherwise the 1098-T goes on the student return).   

2) then, the 1099-Q goes on the tax return of whomever's SS# is on the form.  That will be the parent if they received the 529 money.  It will be the student if the student or the college received the money directly from the 529 plan (sounds like YOU are the 'recipient' the way you described the situation).  did you receive the money directly from the 529 plan? 

3) assuming the 1099-Q goes on your tax return, be sure you post other school expenses (room and board being the biggest) when asked by TT.  failure to post these other expenses that are not reflected in the 1098-T MAY BE the reason you are being taxed on some of the 1099-Q earnings (box 2)

4) and this is where it gets really confusing (if you are not confused already!), if you get the AOC credit or the lifetime earning credit, some of the college expenses were consumed to provide this credit which leaves fewer expenses available to cover the 1099-Q distribution, so it's a form of 'double dip' otherwise.  (You can't use some of the expenses to get the credit and then turn around and use the same expenses to reduce the income tax liability on the Box 2 earnings on the 1099-Q).  You are better off with the AOC credit or Lifetime earning credit, ,than you are paying taxes on the BOX 2 earnings on the 1099-Q form, so I wouldn't fret it.  

5) on another thread I walked through an example of how this all works. 

https://ttlc.intuit.com/community/college-education/discussion/re-handling-various-529-distributions...

if you can post back with some actual figures that are on the 1098-T, 1099-Q and the expenses like Room and Board, we may be able to get you through this.  Remember, it's only the Box 2 earnings on the 1099-Q that create potential taxable income for you- nothing else. 

[Bestvalue888]

Hi thanks for posting your answers and I do have a big problem here hoping i can get your assistance: I have a college son who just started college in 2019 Fall. He is my dependent and he files tax as well because he has 1099-misc. if $3000. I also know we won’t qualified for AOTC due to our income.

So here is the data:

1. 1098-T $7,000  (box 1 only) - I will report this in my return, correct?

2. 1099-Q $8,000 (box 1 only issued to his SS#) - my son will report this in his tax return, correct?  If so, do I need to report Educational Expenses (see below) here or on mine?

3. 1099-Q $26K( box a), $1000 (box b), $25K (box3) issued to me ( parent).

a. I will report this in my return, correct?

b. Educational Expenses: this is tricky sorry...I withdrew the entire 529 by mistake in 2019 thinking 529 is always non-taxable regardless when I use it...mistake.

I paid a total of $15K in 2019 and $12K in 1/2/2020(the billing statement for Spring Semester came out 1/2/2020 so I paid it on 1/2/2020). Can I report the whole total $27K to offset the 529 withdrawal of $34K ($26K + $8k)?

Sorry for the long email but I am very confused and really don’t want to end up with paying a lot of tax on 529.:(

thanks so much!!!

[NCperson]

one question... how much did you PAY for his college in total? $27,000 or $34,000 or some number in between? 

1) the college reported $7,000 of payments on the 1098T

2) you state you paid $15,000 in 2019 and another $12,000 on January 2, 2020

I can't determine is whether the $27,000 from bullet 2 are some of the same dollars as in bullet 1. 

I can tell there was $34,000 distributed from the 529 plan (some went to you, some went to your son / the college), but that is secondary to the question posed above. 

[Bestvalue888]

I paid $27K total.

[Bestvalue888]

And yes the $27K includes the 1098-T amount, which is the tuition for Fall 2019.   So basically the $27 K is for tuition, room and board for Fall 2019 and Spring 2020.

[NCperson]

let's see if I have this straight.....

you stated you made two payments to the college....one for $12,000 and one for $15,000, so $27,000.

but what about the $8,000 that went to your son (which the 529 plan may have paid directly to the college)? was that paid to the college as well, which means $35,000 was paid to the university between you and your son for your son's college costs? 

[Bestvalue888]

I don’t think anything was paid to the college. The 1099-Q $8000 that was issued under my son’s SS# shows Recipient: My name FBO my son’s name from TD Ameritrade.  I don’t understand either but I believe we deposited this into our account so we can use that to pay the tuition and room and board. The Other 1099-Q $26K is issued from CA 529 Plan to us. Sorry I told you the wrong figures for earnings and basis earlier. The correct figures on this one is: 

$26K (1) Gross distribution 

$13k (2) Earnings

$13K (3) Basis

[Bestvalue888]

So nothing went to the college straight. We deposited both 1099-Q amounts into our bank account and pay the expenses from our account to the school.

[NCperson]

1) you had expenses of $27,000

2) you had 529 distributions of $26,000 and $8,000

3) I am going to assume that Box 2 related to the $8,000 check was $2,000 and you will see why below (replace with the actual number when you walk through this post). 

4) some of the 529 distribution will be taxable income since the distributions of $34,000 exceed the costs of $27,000 (but that doesn't mean there will be any tax to pay....keep reading)

5) Post the 1098-T in TT (dad's return).  That consumes $7,000 of the expenses. 

6) You will need to enter the 'qualified expenses" (room and board, books, computers, etc) when asked by TT.  Presumably this represents $19,000 of the $20,000 of remaining expenses. (hold the thought on the last $1,000, I will get to that) 

7) since dad took 529 distributions for $26,000 and the total expenses were also $26,000, (item 5 and item 6), NOTHING is taxable.  In fact, as long as you keep good records on how you came to $26,000 of expenses, you don't have to key in the 1099Q into TT or any of the qualified expenses! Makes it all that much easier that way! 

😎 Now we get to the son's 1099Q.  That MUST be entered as there was a distribution of $8,000 and there is only $1,000 of expenses left to support it.  So 7/8's of the distribution was not required to pay the college expenses.  Therefore 7/8 of the $2,000 of Box 2 earnings are taxable.  But since this is on your son's tax form, it may turn out that his total earnings are low enough that there is no tax to pay on the $1,750 ($2,000 * 7/8) of taxable income in any event. 

make sense? 

[Bestvalue888]

Uhhh very well explained but I have to take sometime to study and understand LoL as this is complicated but to answer your 3), there is no data currently in box 2 earning. The $2000 is what you are assuming, correct? I will try to read again to understand how you come to that. But I am glad at least what I paid (tuition and room and board) for both semesters can be counted even my second payment was made in Jan. I will ask you more questions when I get a chance to study your note again later on. Thanks so much!

[NCperson]

if Box 2 of your son's 1099Q is blank, that means Box 1 and Box 3 are $8,000 and nothing is taxable.  Only Box 2 earnings could be subject to tax. 

I made up the $2,000 in bullet point 3 just to show the math further down.  

So if Box 2 is zero, I wouldn't even put it on your son's tax return, there are no earnings to report so it can't be taxable. 

[Bestvalue888]

Ok I understood now all of it except the last paragraph: 

So on my son's 1099Q.  That MUST be entered as there was a distribution of $8,000 and there is only $1,000 of expenses left to support it.  So I have $7K extra distribution.  I still don’t understand the $2000 calculation.:) can you please explain further? Thanks.

[Bestvalue888]

Oh I see. Box 3 is also blank so this 1099-Q only has box1 $8K.  

So so if I understand this, I don’t even need to report my son’s 1099-Q?  But what if the excess distribution I have..the $7K in this case? If I don’t report my son’s 1099-Q, will IRS chase me as it is a distribution but no expenses? 

[Bestvalue888]

Same thing for my 1099-Q, if I don’t report the distribution, will IRS look for me for an answer about my expenses? Lol I don’t want an audit lol.