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1099-q issues

My daughter had w2 of $1900 and owe nothing but when I put in the 1099-q which all money went to the school, she will owe money now. Why? I thought 529 withrawal is non-taxable if all used for qualified school expense.

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1 Best answer

Accepted Solutions
Hal_Al
Level 15

1099-q issues

You do not report it on the state form either, in any state. 

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4 Replies
RobertB4444
Employee Tax Expert

1099-q issues

It is.  And if the 1099-Q was used entirely for educational expenses then it is not taxable and not required to be reported on your tax return.  The only part of it that would be entered would be the distributions that were not used for educational expenses.  So the system thinks that it is all taxable.  Delete the 1099-Q and you'll be all set.

 

@kvilla199 

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1099-q issues

Thank you for the reply Robert. My other question is, should I not report it to the state return too? I live in Illinois.

Hal_Al
Level 15

1099-q issues

The 1099-Q is  only an informational document. The numbers on it are not required to be entered onto your (or your student's) tax return. The TurboTax interview is complicated and it's easy to make mistakes and that's what has happened. Just delete the 1099-Q. 

   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. 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 (you don’t need it). You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. 

References:

  1. On form 1099-Q, instructions to the recipient reads: "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." 
  2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
  3. ("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." 
Hal_Al
Level 15

1099-q issues

You do not report it on the state form either, in any state. 

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