1099-Q and 1098-T do not match

Forum|Forum|5 years ago
July 9, 2020
1 reply
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Hi - trying to wrap things up but getting tangled around this 529 silliness. Here is the situation:

- 529 plan withdrawls are summarized accurately on the 1099-Q

- the last withdrawl was on 12/20/19 for the Spring 2020 semester payment

- the college did not recognize the payment until early January 2020

- the college did not include the Spring 2020 payment in the 2019 1098-T

- 1099-Q and 1098-T numbers do not match

Please suggest how I should account for this while filing. TurboTax is indicating that the excess withdrawls are taxable.

thanks,

Rob

Hal_Al

Employee

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. You claim the tuition credit, or report scholarship income, or claim the 529 plan earnings exclusion, based on your own financial records, not the 1098-T.

The money was sent to the school in 2019. It counts as a 2019 payment for purposes of the 529 plan distribution.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You cannot double dip! When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."

rpellegrAuthor

thanks for the quick response. a couple of follow-ups for your consideration:

- the 2019 529 distributions all went directly to the college and paid the full educational expenses for 2019 and Spring 2020

- does that mean i should include Spring 2020 expenses when I enter the expenses according to my records (which would match with the 1099-Q info)?

- does that mean that TurboTax will enter nothing about the 1099-Q in the tax forms?

Also... about the American Opportunity Credit

- I am thinking to NOT claim my son as a dependent anymore (he is essentially >50% on his own support)

- based on his lower income should he qualify for the credit?

thanks again!!

Rob

Hal_Al

Employee

Q, does that mean i should include Spring 2020 expenses when I enter the expenses according to my records

A. Yes, if you are claiming the 529 plan earnings exclusion (1099-Q).

Q. does that mean that TurboTax will enter nothing about the 1099-Q in the tax forms?

A. Yes. You don't need to enter the 1099-Q, at all. But if you do, it goes on you son's return, not yours (your son is the "recipient" since the money went directly to the school).

Q. based on my son's lower income should he qualify for the American Opportunity Credit (AOC)?

A. Simple answer: No. But, it's complicated. If he is not your dependent, he does qualify for the non-refundable portion (up to $1500, not $2500) of the AOC. So, he would have to have some tax liability to get any benefit.

A full time, unmarried student, under age 24, is only eligible for the refundable portion (up to $1000) of the American Opportunity Credit if he supports himself by working (earned income). You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You usually must have actually paid tuition, not had it paid by scholarships & grants. It is usually best if the parent claims that credit.

Q. I am thinking to NOT claim my son as a dependent anymore (he is essentially >50% on his own support)

A. It's unlikely that he provides more than half his own support if he's paying for college with a 529 plan. The treatment of expenses paid with distributions from Sec. 529 plans and Coverdell ESAs in the support test is uncertain because of the dual nature of these college savings vehicles and a lack of IRS guidance. The consensus among tax experts is that it is parental support, because the parent is the owner of the plan. It would be helpful to your case it the student is the "recipient" rather than the parent.

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

Even if you son qualifies as your dependent, you are allowed to forego claiming him (and the $500 other dependent credit) to allow him to claim the non-refundable portion of the AOC.