529 / 1099Q / Who reports?

Paying for College
1

<p>Bear with me...my husband usually handles the tax information, but is gone for a few months, leaving me to quickly learn.</p>

<p>My husband is the account owner of a 529, with our daughter as the beneficiary. We had a distribution paid directly to Juilliard of 30,000. This distribution covered qualified expenses of tuition, fees, and part of the room and board. We paid the balance of her room and board from cash savings.</p>

<p>The 1099Q came addressed to my daughter and listed her as the recipient. It also showed earnings in the amount of $6,000. </p>

<p>As I was searching past posts about 529s, I was under the impression that we (husband and wife filing jointly) were responsible for this tax reporting. However, I just read a newsletter from our plan's administrator that reads:</p>

<p>If you withdrew funds from your UESP account in 2008, UESP will mail Form 1099-Q to either your or your beneficianry by January 31. The form will be mailed to YOU (the account owner) if the withdrawal check was made payable to you or if it was sent to another 529 plan. It will be sent to the BENEFICIARY (my daughter) if the check was made payable to your beneficiary or their school. The individual who receives the form is responsible for any tax reporting to the IRS.</p>

<p>I just talked my daughter through the task of filing her taxes on a 1040EZ ($1,800 of income through Juilliard work/study). They were electronically filed last week. My guess is that I blew it! Was she suppose to have declared the $6,000 earnings as income?? I would have thought we would have declared it.</p>

<p>I'm confused. Any help would be appreciated.</p>

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<p>If the 529 funds were used for qualified tuition expenses (tuition and fees/books/room and board) there is no tax liability and they do not have to be reported on anyone's tax return. Just keep the 1099 and copies of the expenses paid with your tax papers so that, if you are asked, you can show what the funds were used for.</p>

<p>The tax publication for education is IRS 970
<a href="http://www.irs.gov/pub/irs-pdf/p970.pdf%5B/url%5D"&gt;http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p>

<p>It is worth reading through to see which benefits are most beneficial for you. For instance you can decide you used the 529 to pay for all the room and board and paid the tuition and fees out of other funds. This might make you eligible for the Hope or Lifetime learning credits (if you are otherwise eligible).</p>

<p>Take the time to read through it.</p>