I would appreciate if somebody can help me. In my case I received 1099-Q in my name while the 1098 -T is in my daughter's name since she attended the graduate school. Moreover she is not a dependent on my tax return.
Under these conditions when I enter the forms 1099-Q and 1098-T my Federal Tax due bill increases significantly since TurboTax thinks I got the 529 distribution as an income though in reality I paid this distribution for my daughter's graduate school tuition payment.
I am in the process of completing the returns and now stuck up.
Any help will be greatly appreciated.
If you used all of the proceeds from the 1099-Q to pay for your daughter's tuition and qualified expenses remove the 1099-Q entry from TurboTax completely.
TurboTax is calculating income because it doesn't see associated expense (since she is not a dependent on your return.)
Form 1099-Q is only required to be listed on the tax return when there is taxable income. If the entire amount was used for qualifying expenses, and those same expenses are not being claimed on your daughter's returns for education credits, then there is no need to report the distribution on your tax return.
Keep in mind that the distributions from education savings plans reported on 1099-Q may be used for a greater number of "qualifying expenses" than those that are used to calculate the credit that my be claimed on the student's own return. (It is not limited to only tuition, fees, and books.)
For more information, you may wish to see IRS Publication 970.
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Thanks Susan for your response. Couple of Questions:
1. Hope there will be no audit query if I don't list the Form 1099-Q (I don't have any taxable income from this distribution)
2. I was trying to read the last sentence of your answer. So other than Tuition, Fees and Books what are the other qualifying expenses that can be used against the savings plan distribution.
Thanks again and stay safe.