1099q

Parent Cafe
1

<p>My granddaughter received a 1099Q in her name with her SS#, but the parents are claiming her as a dependent. the amount on the form is from a 529 plan and has earnings, but most of the money has been used for fall 2012 and winter 2013. Whose return should i
t be listed on</p>

2

<p>It depends.</p>

<p>If your granddaughter has non-qualified distribution of the 529 savings, she should report the 1099-Q on her return.</p>

<p>If her parents have any qualified expenses after 529 distribution, her parents should report the 1099-Q on their return.</p>

3

<p>If the amount of qualified education expenses(tuition, fees, books and supplies, room and board if at least a half-time student) minus the amount of tax-free scholarships and grants exceeds the amount of distributions in the tax year, the distribution is tax free and there is nothing to report by anyone. Tax free distributions aren’t reported on any tax form. </p>

<p>If the distributions exceeded QEE then the student needs to report the excess distribution and report the earnings of the excess as taxable income. In this situation there is also a 10% penalty.</p>

<p>If part or all of the earnings of the distribtution are being made taxable by the student so that the parents can use those expenses for the AOC, then the penalty doesn’t apply.</p>

<p>See chapter 8 of Pub 970:</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p&gt;

<p>When using tax software, the 1099Q info should be entered for both returns so that the program can use the info to determine taxability to the student or whether the distribution affects the parents ability to take the AOC. Entering info into a tax program doesn’t necessarily mean the info is being sent to the IRS. The program needs the info and answers to some questions related to the distribution to determine how to properly handle the distribution for both the student’s and parents’ return.</p>