Question

!098T and 1099Q

Forum|Forum|3 years ago
March 24, 2023
2 replies
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I have used TT for more than 20 years and never have I run into anything as confusing as this. Been working this for a month without ever being sure of where I am. Here's the data.

I am grandparent 529 owner.

student beneficiary is dependent of parent.

1098T Box 1 $28180, my records show $23184

1099T Box 5 $13600

no other scholarships

Box 5 does not include 529 payments

no scholarship restriction

1099Q Box 1 $24717

1099Q Box 2 $17015

Student name on 1099Q

Room & Board $10356

Other QE $67 books

Other taxable income $7385 W2

Parent claiming $2500 AOTC credit for $4000 of QE

freshman

529 has unreturned $265 overwithdrawal

Help!

AmyC

Employee

I am simple. Work through the goals, no 1099-Q, get AOTC.

Let's start with the 1099-Q of $24,717. Subtract room and board $10,356 = $14,361 left to use on tuition. The 1099-Q is completely used on education expenses and does not need to be entered. Tuck it away. I don't see an over withdrawal.

Box 1 of 1098T shows tuition of $28,180 Let's subtract out the part paid by the 1099-Q of $14,361 leaves $13,819 to manipulate. We want $4,000 to be paid by the parents to claim AOTC. Sp $13,819 - $4,000 = $9,819 paid by scholarships.

Box 5 of 1098T is $13,600 and it paid $9,819 of the tuition money. This leaves $3,781 to cover other expenses. Books $67 and any other supplies would be subtracted from the $3,781 and the remainder will be scholarship income to the student.

W2 income $7385 plus scholarship income = $11,099 which is not required to file unless a refund of monies withheld is desired.

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dulangAuthor

Thanks but this is neither simple nor obvious. It is so unstructured that I can't relate it to any other tax process I have ever encountered. It seems to require addressing tuition, scholarships and expenses, each at a gross level versus netting them out against each other first. Not used to that kind of ad-libbing with taxes. Couple of questions/comments:

1. Is it fair to say that the following determined the sequence you followed?

AOTC does not cover room & board.

Use all of the 1099Q money first.

Apply scholarship/ grant money to any remaining tuition.

Anything left is add'l income.

2. This process looks programmable to me. I don't understand why it is not automated better within TT. I don't know if I can stand this for five more years. Altho I'm a 20 year customer, I'm going to be shopping around.

Thanks again for your help. Now I have to figure state.

AmyC

Employee

For your return:

Enter the 1098-T as is

Box 1 $28,180

Box 5 $13,600

This will take the $4,000 and use it towards the AOTC. You have a paper trail if the IRS asks from this thread and your paperwork.

For the student return:

To get $3781 or less there are two ways. The correct method is to add the 1099-Q before the 1098-T but the program wants to reserve $10,000 for Lifetime Credit so that is not the best method.

Enter the 1098-T

Continue entering

Education summary, select Scholarships/ Grants

Other aid, yes

Enter the amount needed for the correct taxable income.

$18,361 gives you $3,781 taxable. This can be seen on sch 1 under Scholarship

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dulangAuthor

If you follow the proper sequence and enter the Q first before the T, does the program still try to use $10,000 for the AOTC credit IF you have adjusted that amount downward to $4,000 on the screen that asks how much expense you are allocating to the AOTC?

T

tmunoz

Yes, it should use the qualified expenses for the 529 distribution without reserving it for the education credits if you enter all the income, then the Form 1099-Q, and then the Expenses and Scholarships ( Form 1099-T section).

If it is entered out of order, the system may be reserving $10,000 of educational expenses toward an education credit, either American Opportunity Credit or Lifetime Learning Credit. You may want to see if that leads to qualify for a credit, but if it does not, or if it will cause part of your 529 distribution to become taxable, then yes, it is fine to change that field to zero or a different number above the amount of the 529 distribution.

If room and board were paid from the 529 distribution, please go back through the Education Credit section and be sure those were entered. That is not a qualifying expense for the Education credits but can be used with 529 funds.