No it was not taxed. That’s the question I am asking should it be taxed? I missed entering & 529 plan did not send 1099-Q either 😞
Q. That’s the question I am asking should it be taxed?
A. No, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) and computers to cover the distribution.
You can just not report the 1099-Q, at all. 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!
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."
Yes, there is some audit risk. But, we've noticed, here in this forum, that there has been less cases of IRS inquiries over 1099-Qs recently.
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