Student tax filing question of 1099-Q and 1098-T

[chitangt]

My student has w2 = 5K, federal withhold tax = 135

claimed as dependent on my tax return

1098-T box 1 = 12K

1098-T box 5 = 9K

1099-Q box 1 = 16K

1099-Q box 2 = 6K

What should my student file 1099-Q and 1098-T?  

If my student file 1099-Q, my student has to pay federal tax of 1500 for 6K earn.

if my student file 1098-T, my student has to pay federal tax of 219 for 9K scholarship

What should my student do?

We filed our tax with both forms and we did not receive any credit.   Even we paid for all expenses including tuition and R&B.  529 and scholarship barely cover all.

[MarilynG1]

Based on your 1098-T, you are eligible for an Education Credit for your dependent, and should enter it on your return.

Enter the 1099-Q in your return first.  Then enter the 1098-T.  Then enter Additional Education Expenses, including Room & Board (even if they lived at home), Books, and any other expenses not included in Tuition.

You student can file their own return, as a dependent, to get the $135 Federal Tax they paid refunded.

@chitangt 

[chitangt]

Hi,

But does my student need to file 1098-T and 1099-Q on his tax return?

[KrisD15]

How much did you pay for room and board? 

[chitangt]

About 4K to 5K per semester, 11K total for 2022.

[KrisD15]

It depends on weather you can get (and want) an education credit.

First, lets talk about your forms.

You have 12,000 Tuition and 9,000 scholarships. That leaves 3,000 in expenses plus books and supplies which are not on the 1098-T. Ask the student what they spent on Books and Supplies and add that. 

Next you have 16,000 distribution and you spent 11,000 for Room and Board, that leaves 5,000 excess distribution. 

Allocate the 3,000 expense to the 5,000 leaves 2,000 distribution the student needs to claim (less books and supplies) 

In this case, the student claims 2,000 distribution, but that is split between Earnings and Contribution. 

You can enter the 1099-Q into his TurboTax program and then claim 14,000 in expenses. 

(You can enter 14,000 as room and board so the program makes the proper calculation, this is easiest, or split it up as 11,000 room and board and 3,000 tuition) 

OR

You can have the student claim 2,000 of the scholarship. 

On the Student's return, go to the Education Section under Deductions & Credits and only enter 2,000 in Box 5, nothing in Box 1. 

IF YOU DO WANT A CREDIT, and you are eligible for one, you can claim 4,000 of the tuition and have the student claim 6,000 of the scholarships. 

[chitangt]

Thank you for your suggestions.

We don't get any credit because of our income.  But I understand a bit more about these 2 forms.  If all the distribution and scholarship are paying toward the student's education, the student doesn't need to report.  As parent, we already file these 2 forms and paid all and a bit more toward the education. 

My question focus on the student, what he should file.  But your explanation helps a bit and I now understand what the student needs to do.  Thanks.

[AmyC · Accepted solution]

The 1099-Q would not be entered since it was used entirely for qualified expenses. $11k room and board plus $5k tuition. IRS Pub 970 states: Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return.

The 1098-T would leave a maximum of  $2,000 taxable scholarship income. $9k scholarship - $7k tuition - minus any books and other qualified expenses for taxable scholarship income. Follow the instructions of Kris above for entering the taxable amount. See page 12, What Expenses Qualify at IRS Publication 970, Tax Benefits for Education.

The parent did not need to enter either.

[chitangt]

That was what I understood when reading from IRS pub 970.  My student/son didn't report it.

Thank you all.