529/1099Q

Forum|Forum|4 years ago
April 6, 2022
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-I received a 1099Q that has myself as the recipient

-My daughter received a 1098T from her college

-My daughter received scholarships and $5980 worth of my GI Bill to cover her college expenses

As I see it the 1099Q amount is taxable because it did not cover any qualified education expenses. This money is intended to provide her support through college and pay unqualified expenses. I put the 1099Q money in her bank to do so. Although I am down as the recipient how do I have this 1099Q money taxed against her at a lower rate and also avoid the 10% penalty fee since she received scholarship money?

Carl11_2

Employee

First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred to and included in the total on line 7 of the 1040.

Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is included in the total on line 7..

Finally, out of pocket money is applied to qualified education expenses

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over, the left over excess is taxable. While the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.

kirlinscAuthor

Thank you. Under "Did Kassidy pay for books or materials to attend school?" I checked yes. It lists the "Tuition and Enrollment Fees" as the same number I provided off the 1098T. That number included 'Room and Board'. Do I still list the amount of room and board below under "Room and Board" or just list any additional expenses over what was not captured on the 1098T amount that transferred?