1099q payments from qualified education programs printed forms

Forum|Forum|4 years ago
February 25, 2022
1 reply
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In my daughter's fourth year of college and TurboTax has awarded me $2,500. However I'm noticing something when comparing this year to last year specifically on the printed forms that say qualified tuition program computation of taxable distribution...

Last year it showed her total distributions and that number was the same as that shown in adjusted qualified higher education expenses applied. This year the amount in total distributions does not match that shown in adjusted qualified higher education applied... it's off by about $8,000. I don't really understand this I'm getting the $2,500 credit it says but it also says about 2,200 in line 7 is the taxable amount to recipient. Does that mean I have to add that amount to my daughter's return because I've never put the 1099q or t on her return before. She works part time...hardly pays any tax.

Furthermore I'm just thoroughly confused as to how this is happening.

The 1099-t shows total payments received 51k ...scholarships or grants 23k. The balance of 28k is accounted for on the 1099 Q sheet where it shows a gross distribution of 27k and I wrote a check for $1,000 this year. So I didn't overdraw the 529 plan so what does it mean when it says the taxable amount to the recipient....

KrisD15

Level 15

The program is allocating part of the expenses towards and education credit.

Usually the credit for the parent is worth more than the tax for the student.

If you are getting the American Opportunity Tax Credit, that credit maxes out with 4,000 expenses, so claiming more in expenses than that is silly.

If you are getting the Lifetime Leaning Credit, it maxes out with 10,000 expenses.

You have a couple options.

1. If expenses are equal to or less than distributions/scholarships, and you don't want the credit, just delete the 1098-T and 1099-Q.

2. If you do want the credit, and the credit is the American Opportunity Tax Credit, go back through the Education interview until you FINALLY reach the allocation page and change the amount of expenses to use for the credit to 4,000. If this results in 3,000 taxable income (because of your 1,000 out-of-pocket) the student claims that.

ADDITIONALLY be sure to enter additional expenses not listed on the 1098-T, particularly Room and Board expense. A distribution used to pay Room and Board is a non-taxable event. If at least 3,000 of distribution can be allocated to Room and Board, and with your 1,000 out-of-pocket, you would have the 4,000 needed for the credit and there would be no taxable income for the student to claim.

IRS PUB 970

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confusedrfAuthor

Level 6

I wish I could put your brain in my head for 5 minutes hahaha. I just have had a hard time with this for 4 years , getting my head wrapped around all this. I don't want to take something I'm not entitled to and I don't want to mess up my daughter's tax return.

Bottom line v TurboTax does some sort of check and pops up a screen saying you're getting $2,500 in green and suddenly my refund grew by $2,500.... Am I good to go if I just leave everything the way it is?

When it says the 2200 is taxable by the recipient is

me or is that my daughter? Again I've never entered the Q or t on her tax return , it's always been entered on mine although they're in her name. I'm hoping it's me because I wouldn't know where to put the 2,200 on her tax return.

BTW, She lives at home and is a commuter I've never tried to input anything for room and board.

KrisD15

Level 15

Yes, that sounds right and you can go with that if you like.

Depending on what your daughter earned, the additional income might not make a difference in her tax liability.

The distribution is taxable to the taxpayer listed on the 1099-Q. If the program says the student needs to report that, it should give you directions for doing that. If not, then enter the 1099-Q on her return and report the portion used on your program (for education expenses) so she only claims the difference.

There are tons of options with the education section, which makes it confusing.

Additionally, some expenses make only some assistance tax-free. For example, pay Room and Board with a scholarship, and that scholarship is taxable income for the student. Pay Room and Board with a 529 Distribution and the distribution is tax-free.

The IRS is very generous with the education credit and encourages taxpayers to claim the credit if they are eligible, They also suggest allocating part of a scholarship and/or distribution to the student if that results in a more advantageous return for the parent.

You are allowed to claim room and board expenses relating to a student that lives at home. If you wanted to add that, and/or books and supplies, the distribution might be tax-free while you also get the full credit. Ask your daughter about book expense since they can be pretty high.

"Families may also be able to use 529 assets for room and board for students living at home. But the cost allowable must be lower than the cost of living on campus. Some colleges may specify a cost for “commuters” or “at home.” Still, the student at home would only be able to use the 529 savings for the lesser amount."

You can always go back through the education interview and add expenses.

Document what you did and keep everything with your tax file.

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