1099Q

[sandy613]

I have been using Turbotax for many years and I have always trusted that it would steer me in the right direction.  This year I was paying closer attention to how each of my entries effected my taxes.  I noticed that when I entered my 1099Q it resulted in my owing a lot of taxes.  I read several forums and realized that I should not enter the 1099Q because all of the money on this form was for qualified educational expenses.  However, I have entered the 1099Q for the last 4 years trusting that Turbotax would ask me questions to prevent such a simple but sizable error.  I don't know if I should amend my past taxes and I don't know how to do it.  Please advise.

[MinhT1]

On form 1099-Q, instructions to the recipient read: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.

If necessary, you can amend the last 3 returns.

Please read this TurboTax article on how to amend your return.

[Critter-3]

In the education expenses section you should also be adding the expenses against the 1099-Q distribution so that the distribution is not taxable ... maybe this year you looked at the Refund-O-Meter a screen earlier than normal.   If you have not yet entered the education expenses keep going.  

[sandy613]

Thank you!  I don't see where you are supposed to enter the educational expenses against the 1099Q.  Can you please clarify?

[Critter-3]

Enter it in the education section of the Deductions & Credits tab.  

[sandy613]

I am looking at that section.  I see places to input various forms.  I don't see any places to list expenses.  Are you talking about the 1098T which does not cover all out of the qualified out of pocket expenses?

[Critter-3]

Yes ... you may or may not have a 1098-T from the college ... check online for it. 

[sandy613]

Thanks!  I will have that form by next week but it is not comprehensive in terms of my expenses.  I really wish that Turbotax had asked a question regarding the 1099Q to determine if all the expenses were qualified.  For this year, I can just remove the form.  I can amend for 3  years which is a huge pain but doable.  For 4 years ago, which was my first year with the 1099Q, I have lost that money.  I trusted TurboTax to ask the right questions.  

[sandy613]

It is true that it is on the 1099Q form but I did not read that.  TurboTax says-

Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.

That is what I read over and over so I did not think that I needed to read the instructions on the 1099Q.  I am very disappointed that I have lost a lot of money trusting TurboTax

[sandy613]

After doing more research, the 1099Q glitch for Turbotax has been known since 2019.  I am amending my last 2 years of returns.  I don’t know whether I should remove the 1099Q for the last 2 years or put 0 on the lines on the forms were this information is entered on the 1040, Schedule 1 and Schedule 2.   I cannot get answers to these questions from Turbotax without paying them more money.  Does anyone know the best way to amend this?  I already watched the Turbotax video but it was not specific enough.

[Hal_Al]

First, verify that you need to amend. For tax year 2018, if any of the 1099-Q was taxable, it will show on line 21 of Schedule 1.

For 2019 and 2020, if any of the 1099-Q was taxable, it will show on line 8 of Schedule 1.

[sandy613]

Thanks!  I verified that 2018 is ok but 2019 and 2020 is in error. Should I amend by putting 0 where there are inappropriate taxes or is there a better method?

[Hal_Al]

You put 0 on line 8 ("other income") of Schedule 1.  If you are using TurboTax to prepare the 1040X, deleting the 1099-Q should accomplish that.

[sandy613]

Thanks!  Is one method considered better (deleting 1099Q vs putting a zero?

[Critter-3]

Actually the explanation of why you are changing it to a zero is the most important thing ... send proof showing that the 1099-Q distribution covered the qualified education expenses so it should not have been taxed.