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February 20, 2024
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Two 1099-Q (in parents and student name) and 1098-T (student name)

  • February 20, 2024
  • 1 reply
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Hello,

This is with reference to last year's message chain https://ttlc.intuit.com/community/college-education/discussion/1099-q-and-1098-t/00/2864188, I have something similar situation. Instead of 2 kids, I have one kid but we both got 1099-Q. He got a 1099-Q for a prepaid tuition plan from IL which was sent directly to college. I received a 1099-Q for a 529 plan withdrawal. 

 

I am not sure if I will claim him as dependent or not

 

I was on track for 529 withdrawal until the college issued him a scholarship for spring 2024 for the amount of $7500 in the last week of 2023, and because of that, now 1098-T has $15000 (instead of $7500 which he got for Fall 2023)

 

here is my situation: so what is your suggestion?

 

Is the student the parent's dependent?yes / not sure
Box 1 of the 1098-T$24,175.00
box 5 of the 1098-T$15,000.00
Any other scholarships not shown in box 5no
Does box 5 include any of the 529/ESA plan payments (it should not)no
Is any of the Scholarship restricted; i.e. it must be used for tuitionfor tuition only
Box 1 of parent's  1099-Q$14,500.00
Box 2 of parent's  1099-Q$2,514.00
Box 1 of students' 1099-Q #1$6,678.00
Box 2 of student's  1099-Q #1-$220.00
Box 1 of students' 1099-Q #2$0.00
Box 2 of student's  1099-Q #2$0.00
Amount of High School tuition$0.00
Room & board paid during college. If student lives off campus, what is school's R&B charge. $5,902.00
Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers$1,289.00
How much taxable income does the student have, from what sources$0.00
Are you trying to claim the tuition credit (are you eligible)?No, as AGI is little more than $180K
    Best answer by Hal_Al

    Q. What is your suggestion?

    A. Fuhgettaboutit

    The 1099-Q and the  1098-T are only informational documents. The numbers on them are not required to be entered onto your (or your student's) tax return.

     

    Ignore the Student's 1099-Qs, there's no earnings to tax.  For your 1099-Q, there are sufficient expenses to cover the whole distribution. 

    Tuition after Scholarship  $9175

    Room & Board                      5902

    Books etc                              1289

    Total QEE                            16,366 > $14,500 on the 1099-Q

    You allocate all expenses to the parent's 1099-Q.

     

    You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) 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! 

    References:

    1. 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.
    2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.

     

                      

    1 reply

    Hal_Al
    Hal_AlAnswer
    Employee
    February 20, 2024

    Q. What is your suggestion?

    A. Fuhgettaboutit

    The 1099-Q and the  1098-T are only informational documents. The numbers on them are not required to be entered onto your (or your student's) tax return.

     

    Ignore the Student's 1099-Qs, there's no earnings to tax.  For your 1099-Q, there are sufficient expenses to cover the whole distribution. 

    Tuition after Scholarship  $9175

    Room & Board                      5902

    Books etc                              1289

    Total QEE                            16,366 > $14,500 on the 1099-Q

    You allocate all expenses to the parent's 1099-Q.

     

    You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) 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! 

    References:

    1. 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.
    2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.

     

                      

    JayKPAuthor
    February 20, 2024

    Thanks @Hal_Al for the detail explanation.

    quick question, if I file tax return for my son even, he does not have earned income, will he get AOTC? in other words, without any income, can someone get "refund" under American opportunity tax credit?

    JayKPAuthor
    February 20, 2024

    and one more thing, that direct payment of $6678 from IL prepaid program to college is not count under $15000 scholarship which is given by university.