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blimb
New Member

1099q recipient is parent and child not dependent

Child is filing separate tax and not  being claimed as dependent on parent's return.

1099q received with parent ss# as recipient.  All money was used for qualified expenses ($4500).  Does the parent have to include 1099q on their return since they are not claiming child as dependent?  If so, how will IRS know that child is related to them since they are not being claimed as dependent?

12 Replies
MiriamF
New Member

1099q recipient is parent and child not dependent

If you were the owner of the 529 or Coverdell, and your child is the beneficiary, then only the beneficiary reports the income. Both the owner and the beneficiary are issued copies of the 1099-Q. Distributions are exempt from tax when used for qualified education expenses.

If you were the beneficiary, and you were not a student in 2016, then the distribution is taxable. Only the education expenses of the beneficiary count as non-taxable expenses. In addition to the tax on the earnings, there is a 10% additional tax on the distribution.

More information about calculating the tax on nonqualified distributions can be found in Chapter 8 of Publication 970, Tax Benefits for Education.


blimb
New Member

1099q recipient is parent and child not dependent

I am the owner and my child is the beneficiary.  She never gets a 1099-q if her ss# is not on the 1099q.
MiriamF
New Member

1099q recipient is parent and child not dependent

Hmm. Maybe because she was your dependent. Anyway, she is the one who reports it. And she is the one who claims any education credit. Thanks for letting me know - obviously, my information source is wrong...
anderson2
Level 2

1099q recipient is parent and child not dependent

Your answer seems to conflict with other information available on this and other forums. Last year, we actually entered 1099-Q and educational expense info in both returns (recipient's return and beneficiary's return as the beneficiary is not a dependent). This may not have been correct. This year I am thinking of just entering the information on our return (we are listed as the recipient). We may get questioned by the IRS at some point but we have good records showing that the beneficiary's expenses clearly exceed the 529 plan distributions even after the $4000 in opportunity credit (claimed on the beneficiary's return) is subtracted. I am quite sure how to avoid this dilemma. We did not want the distribution sent directly to the school as it was used for room and board expenses.
johnnydub
New Member

1099q recipient is parent and child not dependent

I am the parent.  I opened the 529 in my son's name.   I received the 1099-Q from Schwab.  I am the recipient as I did get the money deposited into my checking account.  Box 6 is checked "the recipient is not the designated beneficiary."  My son graduated in May, got a job, and lives on his own now.  Therefore, he is not a dependent in 2019.  However, the distribution was used for qualified education expenses.  How do I manage this on my taxes?  As of now, Turbotax is claiming the box 2 "earnings" as additional income in Schedule 1 line 8 "other income."

kkcinci
New Member

1099q recipient is parent and child not dependent

@johnnydubDid you ever get an answer for how to handle this?

carverrn
Level 2

1099q recipient is parent and child not dependent

I have a similar problem.   My wife is the owner of the 529 with my daughter as the beneficiary.  My wife received the distribution and paid my daughters educational expenses.  In the past this wasn't a problem because my daughter was a dependent.  But now she's a non-dependent because she permanently moved to the state where she attends school since she plans on staying there after graduation.   Because she's no longer a dependent TT won't let me enter the education expense information.

 

The 1099-Q was only issued to my wife (the owner) and not to my daughter (the beneficiary) since the money was distributed to my wife to pay the educations expenses (e.g. tuition, rent).

 

Are we stuck paying taxes on the 529 distribution for 2021 even though the money was used to pay educational expenses of the 529 beneficiary?

 

 

 

 

 

 

KrisD15
Employee Tax Expert

1099q recipient is parent and child not dependent

No, in your case you will need co-ordinate with the student and make sure the expenses you are using to apply to the distribution are not also used by the student. 

If used for Room and Board, keep the receipt for that payment with your tax file. 

If you use any tuition reported on her 1098-T, keep a copy of her 1098-T with your tax file. 

 

If there are more expenses than distributions and scholarship, the non-dependent student might use the 1098-T to apply towards a credit. In this case, the student will need to subtract the amount YOU need from Box 1 when the student enters the 1098-T into her TurboTax program. 

 

Any times YOU took the American Opportunity Tax Credit counts towards HER limit, so if you took it 4 times, no one, including the student, may take that credit for her again. 

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carverrn
Level 2

1099q recipient is parent and child not dependent

Thanks you for the response but I'm still confused as to who files what.

 

TurboTax won't let me enter 1098-T information for my daughter because it says she's not a dependent.  She files separately and as a non-dependent.

 

In my TurboTax, when I try to enter the 1098-T it says "You can't claim education expenses for a person who isn't your dependent."

 

The full amount of the 529 distribution was sent to the school to cover most of the tuition.

 

But my understanding is that I have to claim the 1099-Q because the distribution is in my wife's name and SSN because she paid the money to the school for my daughter's tuition.

 

On a previous message I saw it say that both the 529 owner and beneficiary would get a 1099-Q but my daughter was not issued a 1099-Q, just my wife.   I logged into the 529 account and confirmed there is only a 1099-Q for my wife who the distribution was sent to.

 

:(

 

 

carverrn
Level 2

1099q recipient is parent and child not dependent

I just noticed on the 1099-Q that my wife received that Box 6 is checked which says "If this box is checked, the recipient is not the designated beneficiary".

 

So the 1099-Q  DOES indicate the my wife is NOT the beneficiary but it has no information for my daughter AND my daughter didn't receive a 1099-Q in her name.

 

Does my daughter use this 1099-Q information for her tax return then instead of us entering it on our tax return?

 

 

carverrn
Level 2

1099q recipient is parent and child not dependent

I think I finally figured it out.  I decided to assume that my daughter would use the 1099-Q that my wife received to do her tax returns.  When I said she had a 1099-Q, ONLY THEN did it start to explain that the 1099-Q might be showing the owner and not the beneficiary.  Now it's making some sense.  

 

It would be helpful if TurboTax explained that upfront at the 1099-Q questions.  That the 1099-Q might need to go with the beneficiaries tax return if they are a non-dependent. 

 

Regards

AmyC
Employee Tax Expert

1099q recipient is parent and child not dependent

Yes, your daughter is the beneficiary, claims her own 1098-T and expenses as you are not claiming her as a dependent. If the entire 529 distribution was spent on qualified expenses, your daughter does not need to enter the form. Please see my 529 example with IRS information here.

 

@carverrn

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