1099-Q critical error about SS number not matching

[nholdway]

I have a return for whom I'm entering 1099-Q's. The taxpayer is the student whom parents' 529 distributions, reflected in the 1099-Q's, are benefiting. (She is not being claimed as a dependent on parents' return.) A few of the 1099-Q's show a parent's name "FBO" of the child/taxpayer. When the ProConnect form asks me to enter the SS number, I'm entering the parent's. ("Recipient is not the designated beneficiary" box is checked.)

Then I'm getting a "Critical Diagnostic" on the SS number, saying it "must match one of the dependents in the return." But I wouldn't enter the parent in the return at all.

Obviously I can choose to ignore this diagnostic as it's not an EF diagnostic, but is this a bug? Or should I be entering the child's name (as she's the FBO) and SS number? (On the real 1099-Q, the parent's SS number is indicated.)

[Intuit_Kallana]

Hi @nholdway, on the dependent screen enter the student.  Check the box for "Dependent Not Claimed Each Year" which will enable the Dependent Claim dropdown question to appear.  Select option #2 for Suppress this year.   They will not be claimed as a dependent on the return.  However, on the 1099-Q screen you will be able to select them as the dependent beneficiary and then check the box recipient is not the designated beneficiary.  If you still have issues, please give us a call where we can see the actual file via screenshare or direct send.  How to Contact ProConnect Support 

[nholdway]

Hi, Kallana. That's a brilliant if laborious workaround. It's ridiculous that we have to do that to address this scenario, but that can be a topic for software enhancements. Thank you for this; I'll give it a try. I suppose this is better than just hitting Ignore on the critical alert?

[Intuit_Kallana]

Hi @nholdway it is actually not a workaround, but the actual entry requirement for it.  The form has to have the information about the dependent for the plan per the IRS requirements for e-file.  If the dependent is not on the return, ProConnect has nowhere to link that name and social security information.  So, that is the box that is used.  That box also works for dependents that are not being claimed fully by one parent for CTC due to divorce/separation agreements.  It allows the dependent information to be pullled for forms that need that information without actually claiming the dependent on the return.  🙂

[nholdway]

You do realize that this is the child's tax return I'm talking about, right? Not the parents' return. (And right, she is not being claimed as a dependent by the parents.)

[Intuit_Kallana]

Then in that case the 1099-Q should be filed on the parent's return with the steps I stated not the child's return if the parents took the distribution from the 529 plan setup for her.  If, however, the student took the distribution, then it should show her social security number and she would be the beneficiary on her return.

[nholdway]

I follow you. Yes, the 1099-Q in question does show a parent's name and SS number. I'm having the student take the American Opportunity Tax Credit, so I was placing all the 1099-Q's with her return. But I realize the 1099-Q is really an information form, not really filed with the return, and I've seen some argue that it needn't necessarily be uploaded and imported (if nothing is taxable). (I am also importing the relevant 1098-T.)