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Common questions on entering education distributions from a 1099-Q in ProConnect

by ProConnect Tax Online Updated 1 year ago

Get answers to frequently asked questions about Education Savings Account and Qualified Tuition Program distributions in Intuit ProConnect.

Follow these steps to enter an education distribution from Form 1099-Q:

  1. Go to the Input Return tab.
  2. Select Income from the left menu.
  3. Select Education Distributions (1099-Q).
  4. Scroll down to the Qualified Expenses subsection.
  5. Enter the amounts in the appropriate fields.
    • This is mandatory to show any of the distribution as nontaxable.
  6. Scroll down to the Form 1099-Q subsection.
  7. Enter the amounts as reported on the form.
  8. Select the plus sign (+) near the top of your input screen to add another 1099-Q if needed.

ProConnect Tax will generate a worksheet calculating the taxable part of the education distribution.

  1. Go to the Input Return tab.
  2. From the left of the screen, select Income and choose Education Distributions (1099-Q).
  3. Under the Education Distributions (1099-Q) section, mark the checkbox labeled Spouse, if applicable.
  4. Under the Qualified Expenses subsection, enter the Higher education (net of nontaxable benefits).
    • Check out this IRS resource to learn what’s considered a qualified education expense.
    • Enter the total expenses for any ESAs and QTPs in the applicable fields for the taxpayer or spouse.
  5. Enter the Elementary and secondary education (net of nontaxable benefits).
  6. Under the Form 1099-Q subsection, enter the amounts for boxes 1–5 in the applicable fields.
    • The earnings portion of the distribution for taxable QTP rollovers are included in income on the tax return and subjected to the 10% penalty in Part II of Form 5329. 
    • Refer to Pub 970 for information regarding the taxability and nontaxability of ESA and QTP rollovers.
  7. Click the plus (+) from the top of the screen to add more 1099-Q distributions.

If the distribution becomes nontaxable, there is a strong likelihood that the client will receive a notice indicating amounts as taxable. This is because the IRS was notified of the distribution but doesn’t have any knowledge about what the distribution was used for or how much was used.

There isn't a place in the program to indicate that a distribution was absorbed and not taxable. Use your word processor to create a statement, and attach it as a PDF to your return.

Follow these steps to attach a PDF to a return:

  1. Go to the Input Return tab.
  2. On the left of the screen, select General and choose Electronic Filing.
  3. Select e-file PDF/Miscellaneous.
  4. Select the blue e-file Attachment link at the top right.
  5. Click Attach PDF.
  6. Locate and select the PDF, and then click Upload.

ProConnect doesn't have specific input for Trustee-to-Trustee Transfer Checkbox (6) and Designated Beneficiary Checkbox (6). Refer to the Form 1099-Q instructions for how to treat these items.

  1. Go to the Input Return tab.
  2. From the left of the screen, select Credits and choose Education/ Tuition (1098-T, 8863, 8917).
  3. Scroll down to the Current Year Expenses subsection.
  4. Check that the expenses entered aren't the same as the expenses entered on the Education Distributions (1099-Q) screen.
    • Only education expenses that remain after being used against the distribution can be claimed as education expenses for Form 8863.
    • Inaccurate reports may prompt an IRS notice.
  1. Go to the Input Return tab.
  2. From the left of the screen, select Income and choose Education Distributions (1099-Q).
  3. Under Education Distributions (ESAs & QTPs), enter the Name of payer.
  4. Under Education Distributions (1099-Q), mark the checkbox labeled Spouse, if applicable.
  5. Complete the Dependent Beneficiary subsection only if this 1099-Q belongs to a dependent entered on the Dependents screen.
    • For all other 1099-Qs, leave the First name, Last name, and Social security number fields here blank.
  6. Scroll down to the Qualified Expenses subsection.
  7. Enter any education expenses that may offset the distribution amount.
  8. Enter the amounts from boxes 1-5 in the applicable fields.
    • If the distribution wasn't used to pay for qualified education expenses, leave (4) Rollover: 1=nontaxable, 2=taxable blank.

ProConnect will generate a QTP Distribution Worksheet calculating the taxable amount of the distribution, if any. The taxable portion is reported on Form 1040 as Other Income, and amounts subject to additional tax will flow to Form 5329.

If the QTP Distribution Worksheet isn't generated, and the taxable amount of distribution isn't being calculated, make sure that the Social security number field on the Education Distributions (1099-Q) screen wasn't completed by mistake.

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