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1099-Q earnings being taxed

Forum|Forum|7 years ago
June 5, 2019
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All my 529 distributions were used for qualified tuition expenses as well as books and computer. I can't figure out why a portion of the earnings is being taxed. Am I entering wrong amounts somewhere? Or am I entering the wrong amount calculated for tuition paid?

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Best answer by JaimeG

If your Distribution did not exceed your Qualified Education Expenses then you don't have to enter the information from 1099-Q at all.

If the Distribution doesn’t exceed the amount of the student's qualifying expenses, then the distribution is not Taxable and you don't have to report any of the distribution on your tax return. I understand that this sounds strange, especially regarding taxes, but the IRS does not request any additional information to substantiate whether or not your Distribution exceeded your actual qualified expenses. Nevertheless it would be wise to keep a good record of these expenses just in case your return gets picked up for examination.

To correct this issue simply remove the information from the 1099-Q, or if you like, TurboTax allows you to substantiate this information by countering the amount from the Distribution by entering Education expenses. You can find the Education Expenses Section under Deductions and Credits.

J

JaimeGAnswer

Employee

If your Distribution did not exceed your Qualified Education Expenses then you don't have to enter the information from 1099-Q at all.

If the Distribution doesn’t exceed the amount of the student's qualifying expenses, then the distribution is not Taxable and you don't have to report any of the distribution on your tax return. I understand that this sounds strange, especially regarding taxes, but the IRS does not request any additional information to substantiate whether or not your Distribution exceeded your actual qualified expenses. Nevertheless it would be wise to keep a good record of these expenses just in case your return gets picked up for examination.

To correct this issue simply remove the information from the 1099-Q, or if you like, TurboTax allows you to substantiate this information by countering the amount from the Distribution by entering Education expenses. You can find the Education Expenses Section under Deductions and Credits.

B

brianharg

Doing my Sons return.  Entered both 1099Q and 1098-T info on his return (his SSN is on all the forms and I will not claim him as a dependent) - and other qualified expenses.  Amounts of Education exp is greater than the 1099-Q gross distribution - but still showing taxable???  Here is the info I entered (in rounded numbers).

Gross distribution on 1099Q = 14,500
1098T from university = 13,500
Added $500 books/supplies and $800 for a meal plan

Total Expenses = 14,800 which is greater than the 1099Q

Student info worksheet looks like it is applying the $10,000 tax credit against my total expenses so showing "adjusted qualified higher education expenses"of just $4,800

It then does a calc to determine how much of that is taxable by looking at the "Distributed earnings"   from the 1099Q... this is Part VIII of the worksheet - it is calculating a pretty high taxable number since it is basically "disallowing" the $10,000.

Both these amounts (the 1099Q and Education expenses) are showing up on my deductions side.  But the taxable amount (based upon the above) is still showing in Misc Income.

Should I just delete the 1099Q?

M

mintheocean

How did that turn out? I decided to delete my form because it was showing as my income as well since I funneled the distributions through my checking account and clicked, "myself" as the payee. Apparently when you go into deductions you can fill out the expenses and it will calculate. But I read that if the worksheet shows more out of pocket than withdrawals, the form can be deleted anyway. Since I know I took out only allowed deductions: tuition, room and board, books, etc., I just deleted it. However, although I have submitted my taxes, I would not be surprised if I receive what I think is titled similar to an explanation of exclusion from my tax form.

From now on, I am indicating the payee as the "beneficiary" regardless if I funnel it through my banking accounts and indicate them on my daughter's return if required since she will receive the 1099-Q. Confusing.