1099-Q Distribution for two students

Forum|Forum|2 years ago
April 15, 2023
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I have two daughters that are full time students in college. I took a single 1099-Q distribution for the 2022 tax year that covered both of their expenses. I was the "recipient" of this distribution. Both daughters are listed a students in TurboTax H&B but it is not allowing me to choose both of them as a student whose education expenses were paid with the 1099-Q distribution. My only option is to pick one of the two. Why won't it allow me to choose both of them to offset the distribution with their combined expenses?

TurboTax Home & Biz Windows

Hal_Al

Employee

You cannot take one distribution for two students. Each Qualified Tuition Plan (529 Plan) can only have one beneficiary.

Check the registration of your account for who the beneficiary is.

If you want to use the account for both students, you must first transfer (rollover) money from that account to a new/different account for the 2nd student.

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. 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. 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 also cannot count expenses that were paid by tax free scholarships. You cannot double dip!

References:

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."
IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.