1099Q

Forum|Forum|1 year ago
March 25, 2025
2 replies
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Want to pay only for the gains on a closed 529 account. I can get it to where I’m not getting the 10% penalty but I’m still paying more is it going to my income? Any suggestions on how to enter?

Box 1. 45644.24

Box 2. 21499.78

529 Plan

KrisD15

How much was the distribution?

Did you get Form 1098-T?

If yes, what is in Box 1 and Box 5?

Did you enter the 1099-Q and then the 1098-T into the program?

If yes, what did the program do with them? (Did it tax and if yes, how much?)

When a distribution is taxable, the tax is only on the earnings.

You should only see up to 21,500 (rounded) as income on Schedule 1 Line 8z.

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Wjgsj10Author

Sorry did not enter all info. Received a scholarship for majority of the educational expenses (reason we took out leftover 520 funds)

I believe I’m not subject to the 10% penalty if i received a scholarship. I did receive the 1098-T. Box 1. 17,274.00 and Bix 3. 8,810.00 but part of the Box one is a employer contribution scholarship

Hal_Al

Employee

If you closed the account, without any of the money going to qualified educational expenses, the entire box 2 (gains) amount is taxable and also subject to the 10% penalty.

You say "I can get it to where I’m not getting the 10% penalty". What makes you think you're not subject to the penalty?

What ever you did to make that happens is probably interfering with a correct calculation of the taxable amount (which is $21,500 rounding).

Q. Is it going to my income?

A. $21,500 should go to line 8z of Schedule 1 with the notation "Qual state (or private) tuition prgm from 1099-Q"

Q. Any suggestions on how to enter?

A. You enter the 1099-Q. When asked who is the student, you answer "the distribution was not used to pay any educational expenses"

Wjgsj10Author

Sorry did not enter all info. Received a scholarship for majority of the educational expenses (reason we took out leftover funds)

I believe I’m not subject to the 10% penalty if i received a scholarship

Hal_Al

Employee

Here's quick workaround in TurboTax:

Enter the 1099-Q. When asked who the student is answer: someone else not listed here (lying to TurboTax to get it to do what you want does not constitute lying to the IRS). Enter the student's name when asked. A few screens later, you'll get one simple screen to enter expenses. Press Done at the 1099-Q summary screen, to get there. Enter $45,644 or more of expenses. Also enter $45,644 for the scholarship in the box "Tax-free assistance". This reports the earnings as taxable and claims the scholarship exception. You do not have to deal with the complicated “Educational expenses and Scholarships” (1098-T) section later. TT will prepare form 5329 to claim the penalty exception.