My Taxes or my Kid's taxes?

[LB42]

I took 529 distributions on 2 of my kids (18yrs and 22yrs).

On the 18yr-old TurboTax is saying her Room and Board don't count toward her qualified expenses, so I've over-withdrawn from the 529.

Should I put the 1098-T and 1099-Q on HER taxes or mine?

She has her own tax form because she has earned income ($1K) and unearned income ( $6K)

I'm taking her as my dependent, but where do the education expenses go and why can't I take her room and board as qualified for the 529 withdrawl?

This is her first semester of college, but she was greater than half time.

The 22yr old also appears to feel I overwithdrew, but only by a little.  Their 1098-T school fees are less than mine I guess.  So similarly:  should I per the 22yr old 529 and 1098-T on HER taxes or or mine?

[DeeCeeGeeBee]

I'm certainly not a tax expert, but I do have a kid in college.    This IRS pub would seem to agree that room & board doesn't qualify.  I learned something.  https://www.irs.gov/pub/irs-pdf/p970.pdf

You may want to read that to see if the examples on Page 15 look like anything that you have going on.   Also, I assume it would be better for your dependent to claim the income because he or she will likely be in a lower tax bracket than you.   (If it were my kid I would gift them whatever they MIGHT have to pay in taxes ... but at the income you state it's likely that they might not have to pay any?   Possibly the 10% over-distribution penalty maybe.     Check out this article too:   https://www.savingforcollege.com/article/reporting-529-plan-withdrawals-on-your-federal-tax-return

Looks like your dependent might have to file a full-on 1040 (instead of the 1040EZ?) in which case maybe it's easier for you to take the hit on your taxes.   Not sure how much $$ you're talking about but you can weigh the pros/cons.   

I wish you luck!

g

[AmyC]

1. 1099-Q  There is a difference between education credits and the 529 taxation.  Room and board expenses do not count for education credit but are vital to determining taxable 529 distributions.  For the 1099-Q, the 529 plan, you would not have an excess. You want to use as much as possible for room and board. IRS Publication 970, Tax Benefits for Education states on page 45:  Don't report tax-free distributions (including qualifying rollovers) on your tax return.

2. 1098-T  

Student:   The 1098-T is only entered on the student return if income must be claimed from the scholarships. 

Parent:  If the parent does not qualify for education credit, do not enter the 1098-T on the parent return.

Otherwise, the T can go on the parent return and be allocated as needed for college education credit. The IRS has a great brochure that explains how scholarships and tax credits interact. You can't use 529 funds to claim the education credit, which is why we move all we can to room and board.

3. Room and board are a qualified withdrawal for a 529 plan so long as they are what was paid to the college or the amount published for off-campus living by the school.

I am glad you are smarter than your kids and have the good sense to ask questions! It sounds like you should be fine with not claiming any of the 1099-Q on any return since it was near the tuition amount so by the time you take room and board, you may have money left to claim the AOTC. See IRS Q & A about education credits

@LB42 

You posted a link to the IRS education credits, room and board are not allowed for education credit. You also posted my favorite 529 link which explains room and board are deducted from the 529 to reduce taxation. There is no such thing as a 1040ez, everybody files a 1040 these days. 

@DeeCeeGeeBee 

[LB42]

This is amazing.  So, to be sure I got this: I just don't put the 1099-Q on my taxes at all?  No reference to it?

I'm working with NO scholarships (although one of my kid's 109-T has two dollars listed under scholorship or grant)

I don't know if this matters, but my kids are getting taxed at my rate via the 8615 forms that effectively "link us all together."  They made $6K each or so in passive income, so I'm stuck with that.

Given the no scholarship and the 8615 linking, I'm posting the 1098-T on my taxes or on my kid's taxes?

I'm so close to being done, but this last step is really killing me.

[AmyC]

I promise, if the entire amount of the Q went to qualified expenses, the IRS does not want to be bothered and they mention it several times in 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. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.

A couple of years ago I did have the IRS ask to see my expenses and it was a super easy reply showing the payments to the school and other expenses greater than the 529. Out of many years with a 529, just asking once, was great.

The good old kiddie tax - it also applies to scholarships - if it is taxable income. Since the $2 isn't taxable, no worries.

The 1098-T - If the $2 of scholarship went to qualified expenses, it isn't taxable so no need to enter it on the kids.

If you are not claiming education credit, don't enter the T on yours either.

You may be able to tuck the T and Q into your tax folder with your notes on why they aren't taxable. No requirement to enter any of it.

[LB42]

Follow-up...related.

All three of my kids are students...they all earned around $7K in dividend income.  The middle one (20yrs old) is not being asked to use the 8615 form.  TurboTax is saying she needs to meet all three criteria:

• full time student 19-23   YES
• supplied less than half of own support from earned income (a mere $800)   YES
• claimed as a dependent (she is a dependent on my tax return)   YES

But it's not giving me form 8615.  I don't WANT to pay more for her taxes, but I worry I'm supposed to and TurboTax won't let me.

Furthermore, since it won't let me have an 8615 for her, it's potentially messing up her sister's tax forms as well, as they need to cross populate data.

Am I wrong?  If not, how do I get around this?

[AmyC]

Review the entries for student, support, dependent and let's do a little troubleshooting. Follow these steps:

Desktop version: 

1. Delete the dependent and related information
2. Save your return while closing the program.
3. Update the program
4. Open
5. Enter the information again.

Online version:

A full or corrupted cache can cause problems in TurboTax, so sometimes you need to clear your cache (that is, remove these temporary files).

For stuck information follow these steps:

1. Delete the dependent and related information see How to Delete  
2. Log out of your return and try one or more of the following:
   • Don't use Internet Explorer.
   • Clear cache and cookies,
   • Sign in using a different browser.
   • Sign in using a different device.
3. Log back into your return.
   • Enter the information again.