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1099-Q / Who should report it?

yeknod
Level 3

TP claims his daughter.  1099-Q has the daughters SS# on it as the recipient.  Who claims it on their taxes?  The TP or the daughter?

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9 Comments 9
dascpa
Level 11

The parent of the dependent child reports it.  On the 1099-Q Worksheet note the recipient and the beneficiary names.

Just-Lisa-Now-
Level 15
Level 15

Look at the 1099Q worksheet, it lets you select who the recipient is and who the beneficiary is


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
rbynaker
Level 13

@yeknod wrote:

TP claims his daughter.  1099-Q has the daughters SS# on it as the recipient.  Who claims it on their taxes?  The TP or the daughter?


I'll take a step back and ask, what are you reporting?  A 1099-Q is a distribution.  If the distribution was used to pay Qualified Higher Education Expenses then there's nothing to report.  If the distribution was not used to pay QHEE then all or a portion of the earnings may be taxable to the recipient (in your case the daughter).

yeknod
Level 3

So, If I'm understand correctly, as long as the education expenses are more than the distributions, then there is no need to report the 1099-Q on the 1040?

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sjrcpa
Level 15

@yeknod

There's no place to report it on the 1040 if it's not taxable even though there is input for it in the software. IRS has not developed a form. Hence, every year a couple of my clients get a notice about not reporting the distribution.


Ex-AllStar
rbynaker
Level 13

@yeknod wrote:

So, If I'm understand correctly, as long as the education expenses are more than the distributions, then there is no need to report the 1099-Q on the 1040?


Sometimes it's beneficial to first allocate $4K of expenses to the AOTC, even if that means part of the 529 plan distribution is taxable but that's highly situational.

yeknod
Level 3

So, you don't report 1099-Q if all was used for education expenses?

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The 1099Q, if taxable, is taxable to the recipient.  In you case, that is the daughter.  It is not optional.  In the case you set out, it is NEVER taxable to the parent since it is under the daughter's SSN. (Not talking here about Form 8615).

A 1099Q can be reportable even if all was used for educational expenses.  You are only allowed to chose ONE federal benefit for any given dollar of qualifying expenses.  So lets take a simple example.  You have $10000 of qualifying Q expenses, made up of $4000 of room and board and $6000 of tuition.  You have a Q withdrawal paid directly to the school of $10000, equal to exactly the amount of qualifying Q expenses.  Thus, the Q will come in the daughter's (student) SSN.

The qualifying expenses for the T are only the $6000 of tuition.  The parent uses $4000 of T expenses to claim the AOTC.  There are now, for purposes of the Q, only $6000 of qualifying expenses.  Since $10000 was withdrawn, but there are now only $6000 of remaining expenses, daughter will have tax on a portion of the Q earnings.  However, since in this case the only reason there are not enough expenses is because one federal benefit (AOTC) was chosen over another (exclusion from tax on 529 earnings if used for school), the daughter will only have tax but NO penalty.

This is only a simple example.  There are other expenses that can qualify for the T, and thus the Q, other than tuition.  But the bottom line is you have to look at the totality of what happened by corralling the T, all Q forms, and determining who is getting taxed on what.  This includes grandma who lives six states away but also got a Q because she she owns the 529 and got reimbursed from the 529 for amounts she paid to the school.  The program does an excellent job doing this if all Qs are entered properly and linked to the T.

 

taxiowa
Level 9
Level 9

Thx Frusterated.  I am glad someone else understands the entry system of both the Q and T.  And who has to report what.  And the difficulty of Gpa Joe who has 529 plan distribution but has no idea what student's parents did or claimed on their own return.  Nice!