1099Q

[jvarghes]

What do you do when only partial funds used to fund educational expenses. This option does not seem to be available. It says "This distribution was not used to pay any education expenses".  Thanks, 

[JillS56]

The portion of the 1099-Q that was not used for qualified educational expenses should be reported on as other income on your tax return.   

[jvarghes]

Thanks!

On the Turbotax software, when completing form 1099Q section, the options available are a. Childs name, b. someone else not listed here, c. This distribution was not used to pay any education expenses. 

When I select option c., it assumes that all of the distribution was non-educational, so form 5329 line 5 shows the full amount as does line 6. I would have expected line 6 to be the amount that is not subject to the 10% tax and so line 7 is higher and the 10% is higher.  I used H&R block last year, and it calculated correctly. I just switched over to Turbotax after a while to try it out.

Regards,

Jvarghes

[RaifH]

If you or the spouse are the beneficiary, then you want to enter the 1099-Q on your tax return:

1. Enter the 1099-Q in Federal > Deductions & Credits > Education > ESA and 529 qualified tuition programs. Begin by selecting the student for whom you made the withdrawal.
2. Make sure that a distribution code is selected only if one is on your form. Leave it blank if there is not one. 
3. Answer the questions on the Death or Disability, Distribution Transfer, and Refund of Education Expenses screens.
4. After you return to Form 1099-Q Summary screen, hit Done. On What level of school did you attend in 2021? enter the correct one. 
5. If the withdrawal was for attendance at elementary or secondary schools, you will be able to enter the expenses here

If not, you must enter them in the 1098-T section:

1. Select Start/Revisit next to Federal > Deductions & Credits > Education > Expenses and Scholarships (1098-T)
2. Select Edit next to the student's name.
3. Click Edit next to Other Education Expenses (for all schools)
4. Enter your qualified expenses here
5. Return to the Here's your education summary screen and press Continue.

Whatever was not used for qualified education expenses, the earnings portion will be taxable as ordinary income. You will also be penalized for 10% of the earnings as an additional tax from an education account. 

[jvarghes]

Thanks.