Does my daughter file? She made $3900 from work (on a W-2) and is recipient of $8700.00 in 529 funds on 1099-Q in her name. All 529 used for education expenses. File?

Forum|Forum|5 years ago
February 10, 2021
2 replies
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She is a dependent and I filed with the 1098-T on my own taxes. Thanks!

TurboTax Deluxe Online

MinhT1

No, she is not required to file a tax return at her income level. However, if she had taxes withheld on her W-2, she can file a tax return to claim a refund.

If all the 529 distribution has been used for education purposes, she is not required to enter form 1099-Q on her tax return.

If she files a tax return, she has to indicate in TurboTax that she can be claimed as a dependent by someone else.

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Hal_Al

Employee

You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2020 if he had any of the following:

Total income (wages, salaries, taxable scholarship etc.) of more than $12,400 (2020).
Unearned income (interest, dividends, capital gains) of more than $1100.
Unearned income over $350 and gross income of more than $1100
Household employee income (e.g. baby sitting, lawn mowing) over $2100 ($12.400 if under age 18)
Other self employment income over $432, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

Hal_Al

Employee

"She is recipient of $8700 in 529 funds on 1099-Q.

"All 529 used for education expenses."

"I filed with the 1098-T on my own taxes."

She cannot use the same educational expenses, that you use to claim the education credit, to claim that the 529 distribution is not taxable. If there is an overlap, some of the 529 distribution will be taxable on her return. The taxable portion is considered unearned income, so the filing threshold is only $350.

This is usually not a concern, since room & board, as well as books and computers are considered qualifying expense for a 529 plan distribution. In addition, the American Opportunity Credit only uses $4000 of the tuition, in box 1 of the 1098-T.