1099Q Distro to ROTH IRA

[GEOMON]

I am the owner of a 529 and my daughter is the beneficiary.  During 2024 she ask if she could use $3,000 from the 529  to add to a ROTH IRA that she just established. This was done.  I received the 1099Q reflecting the distribution from financial institution who manages the 529 for me and the $3,000 was sent by the same financial institution directly to my daughter who deposited it in her ROTH IRA. As I understand it, I should not repeat  not enter this 1099Q into my tax return on TT. Is this correct?  This bothers me a bit because the financial institution is required to report this 1099Q transaction to the IRS.  Please Advise.

[AmyC]

Please verify your transaction is nontaxable. If it is nontaxable, it will not go on your tax forms. It will just go through the program and worksheets, that are not sent to the IRS.

 IRS Publication 970, Tax Benefits for Education states:

Any amount distributed from a QTP isn't taxable if it's rolled over to:

Another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse),

An ABLE account for the benefit of the same beneficiary or for the benefit of a member of the beneficiary’s family (including the beneficiary’s spouse). But this doesn’t apply to the extent the amount distributed when added to other amounts contributed to the ABLE account exceeds the annual contribution limit. For more information about ABLE accounts, see Pub. 907, Tax Highlights for Persons With Disabilities, or

A Roth IRA for the benefit of the same beneficiary, if the distribution is a direct trustee-to-trustee transfer from a QTP account that has been open for more than 15 years and the amount distributed does not exceed total contributions (and attributable earnings) made to the QTP more than 5 years before the distribution date. However, this doesn't apply to the extent the amount distributed when added to other amounts contributed to Roth IRAs exceeds the annual contribution limit. For more information about contributions to Roth IRAs, see Pub. 590-A.

[GEOMON]

AmyC

The 1099Q that I received from my broker regarding the 529  distribution was marked as a direct trustee-to-trustee transfer so I assume this means it is a non taxable transaction.  I noticed that several people who provided Community response on this subjected  recommend that that the1099Q be filed (not entered) with  supporting documentation when preparing the TT return.  Your response indicated that even if I enter the 1099Q when filling out that portion on TT, it does not go to the the IRS since is is a non-taxable event. Is this correct?

Thanks

GEOMON

[AmyC]

Correct. The IRS asks that you not enter a 1099-Q that is not taxable.  Please remove the form and keep it with your tax files along with any supporting documents.

 IRS Publication 970, Tax Benefits for Education states:

Any amount distributed from a QTP isn't taxable if it's rolled over to:

• Another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse),
• An ABLE account for the benefit of the same beneficiary or for the benefit of a member of the beneficiary’s family (including the beneficiary’s spouse). But this doesn’t apply to the extent the amount distributed when added to other amounts contributed to the ABLE account exceeds the annual contribution limit. For more information about ABLE accounts, see Pub. 907, Tax Highlights for Persons With Disabilities, or
• A Roth IRA for the benefit of the same beneficiary, if the distribution is a direct trustee-to-trustee transfer from a QTP account that has been open for more than 15 years and the amount distributed does not exceed total contributions (and attributable earnings) made to the QTP more than 5 years before the distribution date. However, this doesn't apply to the extent the amount distributed when added to other amounts contributed to Roth IRAs exceeds the annual contribution limit. For more information about contributions to Roth IRAs, see Pub. 590-A.