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?
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.
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."