Regarding 1099-Q and 529.

Forum|Forum|4 years ago
March 30, 2022
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Our daughter is attending college in Canada. Our 1099Q form shows gross distribution. Turbo Tax ask for a 1098T form. Canada has a T2202 form that looks very much like the 1098T. Canada amount is in Canadian $ the 1099Q is in US $. We have bank records to support the 1099Q and plan on using that amount. Her Canada Filer Account number is having trouble inputting into Turbo Tax. All of the cost is school related and can be support by form T2202. Would it be best to not include the information under the 1099Q form.

Hal_Al

Employee

Q. Would it be best to not include the information under the 1099Q form?

A. Yes. You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board to cover the distribution. 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."

Alternatively, Answer no when asked if you have a 1098-T. Then check the box that says you qualify for an exception (assuming the school is on the DOE approved list). That will allow you to enter your expenses (convert to US$).

Room and board, as well as books and computers, are eligible expenses for a 1099-Q. You probably have enough expenses to claim the American Opportunity Credit (unless your income is too high [>$180K married]). and still avoid any tax on the 529 distribution.