1099-T/1099-Q

[bajbkenney]

I am having a problem with educational expenses in TurboTax Premier. My daughter goes to college. I received a 1099-Q from the 529 plan administer, and a 1099-T from her college. All of the 2020 withdrawals made from the 529 plan were for college expenses. I enter 1099-Q information, and then 1099-T information (which is less that 1099-Q) along with additional education expense information (which brings the total up to the 1099-Q value), and the net result is an increase in owed taxes. The sum of the 1099-T and additional expenses is the same as the 1099-Q amount, For additional education expenses, it doesn't matter which category I use (books, course-related material, room-and-board, computer) the end result is that I owe taxes. What am I missing here?

As an example, I put in a 1099-Q value of 50,000. I put in a 1099-T value of 30,000. I then put in a value of 20,000 for books and materials required by  the school. The end result is an additional $2800 in taxes. Only if I put in an additional 20,000 (now up to 70,000 total) under any other education expense does the owed tax go to 0. 

Any advise for this issue, or do I just need to put additional expenses in until the owed tax goes to 0?

Thanks,

John

[AmyC · Accepted solution]

Delete the 1099Q. It needs to be entered after the education expenses to work properly.

You can just leave the 1099-Q off if it was used entirely for educational expenses.

Whether you enter it or not, you want to keep your records straight for the expenses, in case the IRS asks.

See my 529 example, if interested in more scenarios.

Related:  Guide to IRS Form 1099-Q: Payments from Qualified Education Programs.