Common questions about 1099-Q and 529 plans in ProConnect Tax

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.

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.

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 Tax 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.

New in tax year 2024 distributions made after December 31, 2023, a beneficiary of a section 529 qualified tuition program is permitted to roll over a distribution from a section 529 account into a Roth IRA for the beneficiary if certain requirements are met. See IRS Pub. 590-A for more information.

To enter this distributions

1. Go to Input Return ⮕ Income ⮕ Education Distributions.
2. Enter the Payer information from the 1099-Q.
3. In the 1099-Q section enter lines 1-5. For line 4 enter a 1 for nontaxable.
4. For CA filers, CA does not conform to the federal rule and requires an adjustment to be made.
   • Go to Input Return ⮕ State & Local ⮕ Modifications and select CA Modifications. Enter the addback amount on the Qualified IRC 529 tuition plan rollover to Roth IRA line.
   • If additional tax is applicable go to Input Return ⮕ State & Local ⮕ Taxes and select CA Taxes. Enter the amount subject to CA Additional Tax in the Qualified IRC 529 Tuition Plan Rollover to Roth IRA Subject to Additional Tax line.