I filed an extension on my 2014 taxes due to confusion on this one issue.
We took 1,500 out of dd’s 529 account to pay for tuition and fees in 2014. We are claiming her as a dependent on our tax return and claimed the money on the 1098-T to qualify for the American opportunity credit. We had expenses in excess of $15,000 so we have plenty to cover the $4,000 needed for the credit and the $1,500 taken out of her 529.
The trip up is that the 1099-Q came in DD’s name and when I put that on her tax return- they are wanting to tax her on it. This money should not be taxed or penalized since it was used for qualifying expenses, but I can’t use the 1098-T because I already used it on our tax return.
What is the best way to proceed? Should we claim the 1099-Q on our return?
Or should we give her $1,500 to offset the 1099-Q on hers and reduce our expenses by that $1,500?
If 1099-Q money is used for qualify educational expenses of your DD (it seems that you are), you don’t need to report it on your DD or your returns. Just keep all the documentation in case IRS has questions.
How much was on the 1098-T in scholarships? If that amount plus $4000 (for the AOTC) is less than the QEE, you’re fine. If you then used the 529 money for room and board, you’re fine.
1099Q and 1098T are informational forms only, for your use in figuring out what credits you can take or if the child has taxable scholarships over the QEE. The 1098 is usually wrong as the school may include scholarships posted to the account in Dec for the spring semester. Your own records of what you paid and when are usually better.
She received no scholarships. So it appears that we can use the 1098-T, adjust for what we actually paid and leave the 1099-Q off of both returns?
You don’t ‘put the 1098t or 1099Q’ on either tax return. If you didn’t receive any scholarships or grants, the 1098 T will just tell you how much you paid for tuition and fee. You said that was $15k. Just take the $4000 AOTC tax credit (which should yield you $2500).
You need to include information from the 1098T on the 8863, so in effect yes, you do put the 1098T on the parent 1040.
But if you never receive a 1098 you can just fill out the tax form with your own numbers, or fill it in using the numbers and then self correct it with the amounts you actually paid or the scholarships you actually paid. It’s not a necessary form and some colleges don’t even send them.
It’s a required form with few exceptions.
[quote]
Specific Instructions for Form 1098-T
File Form 1098-T, Tuition Statement, if you are an eligible
educational institution. You must file for each student you
enroll and for whom a reportable transaction is made. Also, if
you are an insurer, file Form 1098-T for each individual to
whom you made reimbursements or refunds of qualified
tuition and related expenses.
Exceptions. You do not have to file Form 1098-T or furnish
a statement for:
Courses for which no academic credit is offered, even if
the student is otherwise enrolled in a degree program;
Nonresident alien students, unless requested by the
student;
Students whose qualified tuition and related expenses are
entirely waived or paid entirely with scholarships;
and
Students for whom you do not maintain a separate
financial account and whose qualified tuition and related
expenses are covered by a formal billing arrangement
between an institution and the student’s employer or a
governmental entity, such as the Department of Veterans
Affairs or the Department of Defense.
Who must file. You must file Form 1098-T if you are an
eligible educational institution. An eligible educational
institution that is a governmental unit, or an agency or
instrumentality of a governmental unit, is subject to the
reporting requirements of Form 1098-T. **A designated officer
or employee of the governmental entity must satisfy the
reporting requirements of Form 1098-T.