How do I file 1099-Q for distributions

Forum|Forum|6 years ago
February 23, 2020
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We took distributions in 2019 for our son's college expenses from the 529 Savings Plan we have for him. This was for his rent at school. We had the distribution sent to our checking account due to his landlord taking the rental payment from that each month. Box 6 is checked on the 1099-Q (recipient not the designated beneficiary). Should I report this on our Federal Taxes and how do I avoid penalties? Is it better to report on our son's taxes?

DavidS127

You report the 1099-Q on the tax return for the person claiming the education expenses (e.g., the 1098-T). If you son is your dependent, those education expenses will generally be reported on your tax return, and if that is your situation, you enter the 1099-Q on your tax return.

You avoid penalties by using the entire distribution for education expenses, which for the 1099-Q distribution includes some things not reported on the 1098-T and not eligible for the other education credits and deductions:

room and board, books, fees, supplies and equipment;
purchases of computer or peripheral equipment, computer software, or internet access and related service (used primarily by the beneficiary enrolled at school); and,
payments on qualified student loans.

So, make sure you have entered all these in TurboTax for the year you received a distribution.

Note that there are some decisions about how to "allocate" your education expenses to the 529 plan distributions versus the other credits. Depending on your son's other education expenses and scholarships, it is sometimes better to apply education expenses toward the other education credits such as the American Opportunity Credit (AOTC) and pay taxes on the earnings of the 529 account distribution.

On the other hand, if your son is ineligible for other credits because of your income levels (e.g., the American Opportunity Tax Credit), you want to allocate "zero" to those credits in TurboTax so that the software will apply all your qualified education expenses against the 529 plan distribution when calculating the taxable portion (instead of "using" some for an AOTC you don't get anyway).

Click the "magnifying glass Search" icon on the top row, enter "1099q" in the search window and press return or enter, and then click on the "Jump to 1099q" link to begin entry of the 1098-Q.

Note that the question about the recipient versus beneficiary is talking about the name of the Form 1099-Q (could be you, your spouse, or your son) versus the person for whom the distribution was used (your son).

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mmitschAuthor

Thank you for your response!

I thought, from what I have read, that room and board were allowed. I am still confused about how to enter the amount for the 1099-Q and what it was used for.

linaj20201

If you have not filed, here are the steps to enter a Form 1099-Q:

In TurboTax online,

Sign in to your account and select Pick up where you left off
At the right upper corner, in the search box, type in 1099q and Enter
Select Jump to 1099q
Follow prompts

If you have taken out distribution from your 529 plan to pay for any qualified education expenses like the tuition or room and board, a Form 1099-Q is issued. If the distribution doesn’t exceed the amount of the student's qualifying expenses, then you don't have to report any of the distribution. If the distribution exceeds these expenses, then you must report it as income. Who was the Form 1099-Q sent to? The recipient on the form usually reports it on their return. However, if you claim your son as a dependent on your taxes, you would report it on your taxes.