1099-Q in Dad's Name but it was designated to Daughter (not a dependent)

Forum|Forum|4 years ago
February 15, 2022
2 replies
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I have a 1099-Q that shows dad's name as the recipient but the money was used for their daughter's (NOT a dependent) college expenses.

Gross Distribution = $18,000

Earnings = $15,000

Basis = $3,000

I'm preparing dad's 1040. How does this get reported on dad's 1040 so that he doesn't have to pay tax on the earnings? Normally, I would link the dependent's name to the 1099-Q worksheet but there is no dependent.

ProSeries Professional

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GodFather

Intuit Community Champion

I show only the earnings as other income. I then back out the earnings as "Qualified Education Expenses". Essentially it's a wash. It all goes under Other income, + / -

I'm assuming he is paying educational expenses for the daughter, even though she is not a dependent?

E

Ephesians3-14Author

Level 7

Right - he just took the money out of the Sect 529 plan and gave it to the college.

GodFather

Intuit Community Champion

I've been using the +/- for earnings only within other income for many years. I've never had an issue with it.

rbynaker

Level 13

IMO this is a systemic problem at the IRS. While there are software worksheets, there are no IRS forms to report something that ends up being non-taxable. I had a partially taxable one last year where I attached a free-form note explaining that $xx,xxx of education expenses were for Name SSN, leaving $y,yyy as taxable income reported on $wherever_they_moved_line_21.

The IRS does have some sort of document matching on these things so tell your client to expect a letter and call you ASAP when they get it. I doubt attaching a note to the return will help (they really need to come up with a form for this!) but it makes it easier to resolve later. I've been told by a manager in the AUR unit that all CP notices are reviewed by a human before being sent out. Based on some of the CP notices I've seen, I personally find that hard to believe.

Rick