1099 q and 1098 t difference

[rkvsh]

529 plan directly paid tuition for 2023 spring semester to my university in Dec 29, 2022 however it showed in university system on Jan 5, 2023 that they received the payment. Hence 2022 1099 T does not show the amount whereas 1099 Q showed that I withdrew the money. How do I reconcile this?

[KrisD15]

The 1099-Q and 1098-T are used to make calculations. 

Distributions can be applied to Room and Board OR Tuition/Fees, to be non-taxable. 

Scholarships may only be applied to Tuition/Fees, or they are taxable. 

More information would be needed, such as whether you are applying for an education credit, 

but basically, the payment shown on your 1099-Q may be offset by the payment that will post in 2023. 

If the distribution was used for education purposes, leave the 1099-Q out of the program and lower the expenses you claim if you are applying for a credit. 

If the distribution went all to Room and Board, you can leave the 1099-Q off and no other adjustments are required since Room and Board cannot be used for a credit. 

If the distribution covered all the tuition, and there was no scholarship in Box 5, you can leave the 1098-T off as well. 

If the distribution covered PART OF the tuition, enter Form 1098-T and adjust the amount in Box 1 so that it reflects what you paid out of pocket in 2022. Don't include the portion of the distribution for the 2023 payment, you will adjust for that next year (adjust Box 1 DOWN by the amount on the 2022 1099-Q that paid for the 2023 1098-T) 

If you WANT to enter your 2022 1099-Q, use the link under Box 1 on the 1098-T entry screen and increase Box 1 to reflect the portion that crossed calendar years.

Forms 1099-Q and 1098-T are used to 

     Get an Education Credit (based on expenses paid over assistance, such as Distributions, and Scholarships)

     Claim taxable income for assistance received that was not used for education expenses. 

If neither of these apply to you, you can leave the Forms off, the program does not need these numbers if they are not needed for a calculation. 

Be sure that next you you do not use the expenses reported on the 1098-T that are allocated to the 2022 Distribution. 

[rkvsh]

Many thanks for your quick reply. My tuition (only) is paid by 529 plan. Room and board, I paid from my personal account. The tuition bill is directly sent to the university by the 529 plan. I got the spring tuition bill in Dec 2022. My parents told the 529 plan to send the payment to the university on Dec 29, 2022  which university received in the January 5, 2023. Hence 1099 Q shows the Dec 29 payment whereas 1098 T does not show because they received it in 2023. Hence 1099 q shows more money (equivalent to the spring 2023 tuition bill they paid)  than the 1098 T.  My main concern is that IRS will think that I withdrew more money than needed to pay the 2022 tuition. 

[KrisD15]

It would be better if the distribution (1099-Q) matched the 1098-T, but as long as you have documentation, you will be fine. 

I think you (and your parents if they claim you) would be MUCH better to use the distribution for Room and Board. 

Then, the tuition paid "out-of-pocket" may be used towards a credit. 

It does NOT matter how the events transpired over the year, the IRS lets you allocate distributions, scholarships, and expenses however is best for the taxpayer. The IRS shows several great examples in Pub 970 of putting Distributions to Room and Board so that tuition can be used for a credit. 

If you are eligible for an education credit, the IRS encourages you to take it. 

In TurboTax, enter the 1099-Q first, then expenses including Room and Board. 

You can pay for the first three months of the following year and claim it the year paid, so add the payment that crossed years. As long as you have proof that you made the distribution in 2022, you should be able to claim the expense for the January, February, and March classes. 

Pub 970

[rkvsh]

Thank you for your help.

[blw44]

I have a similar issue to the one you responded to except opposite.  The 1098-Ts are accurate for tuition amounts in 2022 and 2023; however the 529 Plan reimbursement  are combined into a 2023 1099-Q (I pay the university directly and then compile everything in Dec for reimbursement).  What happened was even though the 529 Plan reimbursement paperwork was submitted online prior to Christmas in 2022 for that year, they didn't process until the first business day of 2023 (03-Jan-2023) which is why there is no 1099-Q for 2022....just a combined one for 2023.

So in that case do I just change the 1098-T 2023 tuition amount to account for both 2022 and 2023 and adjust the room and board amount to include both years?

I was going to just amend the 2022 tax return but have no 2022 1099-Q and if you don't enter the 1099-Q first  on TurboTax, you can't input Room and Board (the box isn't visible when you do the 1098-T entries.

Right now my 2023 return in TurboTax is indicating I have just under $10,000 (from the 2022 tuition and room and board) that is not accounted for and would be taxable even though I have the records reflecting the 529 funds were used for qualified education expenses.

[AmyC]

If the Q went to qualified expenses, it should not be entered. However, you will need to keep all your records to prove this, if the IRS asks.

IRS Publication 970, Tax Benefits for Education states:

If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.

Page 45  repeats: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

@blw44 

[blw44]

Two problems with response:

1) You can't enter 1098-T room and board without entering 1099-Q first in TurboTax.  Does that matter, or do you just ignore what the total educational expenses were for the year knowing you have records should any questions occur?  I had always just assumed that the IRS used the 1099-Q and 1098-T to bounce off of each other to prevent people from abusing 529 Distributions (although that doesn't make a lot of sense because you still have to add in room and board and other expenses manually.

2) I believe you have to input the 1098-T if you want to apply for any of the educational credits.  It seems like though if you covered the tuition and other expenses with your 529 Plan distribution than the credit would cause a problem since I don't believe you can double dip....so I guess you just have to assume you get the credit for the next tax year and reduce how much you pay using your 529 Plan by the tax credit amount ?

Addl Question 3) Can educational tax credit be used for graduate as well as undergrad college expenses?  Perhaps the best thing I can do for above is just clean up the subject question for the first two years and use the education credit for the remaining undergrad and graduate expenses.

[AmyC]

1. Correct, the IRS can ask and it is an easy process to submit the receipts to them - if they ask. Keep it all in your tax folder.

2. The 1098-T does need to be reduced if any of the Q or scholarships paid for tuition. The program asks.

3. AOTC is undergad years and LLC is grad years.  For the transition year as both undergrad and grad, you can claim AOTC for that year and all expenses. See What education tax credits are available?

[blw44]

Thanks for all your help.

One last question.  We have a similar issue for 529 Plan funds we used for my daughter's private autism school back in 2022.  The 1099-Q didn't process until 03-Jan-2023....however the school doesn't issue 1098-T.

In this case TurboTax allows filling out a pseudo 1098-T by putting in the schools tax number and amount paid for tuition.  Should I even bother doing that or just not input 1099-Q or pseudo 1098-T for this private autism high school?

[RobertB4444]

Do not bother.  If the 1099-Q is used for education purposes then it does not need to be entered on the return.

@blw44 

[blw44]

and I assume leave the 1098-T section blank as well for my daughter

[AmyC]

The 1098-T is only entered on a dependent's return if they have taxable scholarship income.