<p>Ok, this might be a little long, but I want to be as clear as possible from the beginning, so please bear with me...
So we saved 18 years for sons 529 plan and now its time to cash it in. Son is Freshmen and living on campus. We have the Scholarshare program for California and started taking distributions last year for all expenses, including room and board. We don't qualify for AOC due to income limits so only way we can use 529 is for legit college expenses and room and board. So, we had(ve) the option of having the distribution wired directly to our bank account, where we then can write a check to the school for tuition, etc.. Or we can have Scholarshare send check in sons name to schools accounting dept and pay for it.We did both, the first payment we had them send a check to us, the other times we just had them send the check directly to the school.
Ok, so this year when filling out taxes, we received two 1099 Q forms - one for us, one for son. Also received the 1099 T in sons name.
So now my question is: Do I report all the distribution earnings from the 1099 Q's on our 1040 or on sons, or should I split them up, because some of the expenses were paid when we took the distros, and the others were paid when distro was sent in sons name directly to school?
I didn't intend to do it this way - I was originally given advice to just have distribution wired to us, but since I found out they can just send check directly, I have since just let Scholarshare send checks directly to school. But if there is an advantage either way, I'd like to know because splitting it up this way on two tax forms is a PITA!.
Thanks</p>
<p>If you had qualified expenses(for a 529) in 2013 after subtracting tax-free scholarships/grants that equaled or exceeded distributions in 2013, then nothing gets reported on anyone’s tax return. You only have to report something if you had excess distributions.</p>
<p>If you are using tax software, the program will ask you about the distributions but only to check whether you had excess distributions.</p>
<p>If you have the cash-flow, I prefer sending the check to the school and then getting reimbursed in the same tax year so I know exactly how much in expenses there were. We had a post on CC a year or two ago where a school received a distribution directly and erroneously put it on the student’s 1098T as a scholarship. I’m surprised your SSN is on one of the 1099Qs, generally I thought it went to the student. But I’m not an expert in that part of this. Generally whoever’s SSN is on the 1099Q would enter it on their return in the tax program but you would have to divide up the qualified expenses so the program doesn’t think you had excess distributions.</p>
<p>If all the distributions were used for QEE, why is there anything to report on anyone’s return?</p>
<p>For excellent information on 529 plans, specifically the best way to take distributions, have a look at this website:</p>
<p><a href=“http://www.savingforcollege.com/”>http://www.savingforcollege.com/</a></p>
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<p>My understanding is that if the distribution is made to the parent, the parent’s information will appear on the 1099Q, which can cause the IRS to ask questions. Questions that can be easily answered, but it’s still a hassle.</p>
<p>This is exactly on point:</p>
<p><a href=“3 ways to make a 529 plan withdrawal (Video)”>http://www.savingforcollege.com/questions-answers/article.php?article_id=121</a></p>
<p>@Middkid86 - thanks for the link, that helped alot. I know what to do for future distributions at least!</p>
<p>I’m using Turbotax, and it asked all the questions about education expenses, room and board and the cost basis for the 529. I tried two different scenarios for treating the 529 distributions -1) I take credit for all the 1099 Q income (sons and mine) , 2) we split it according to whats stated on both his and my 1099Q’s. The lowest overall tax burden by far is the case where we split it. Of course the IRS may not favor this method, so I may have to contact them directly. I looked at their form 970 and unless I missed something, it doesn’t cover this.</p>
<p>Did you take excess 529 distributions in 2013? If not, there is nothing taxable to report.</p>
<p>Remember, 529 distributions are completely tax free if used for qualified education expenses (after non-taxable aid is deducted).</p>
<p>As I mentioned, TT will think one of you has excess distributions if there aren’t matching expenses on each return. If total qualified expenses were equal or less than total distributions, don’t let TT submit anything concerning this. Sometimes you have to out-think the software.</p>
<p>Adding. Did you enter all the expenses on both returns? Typically you do when the student can be claimed as a dependent, on the parent’s for education credits and on the student’s to see if there are taxable scholarships/grants. TT will tell you that you don’t qualify for the AOC. If you’re entering 1099Q info on both returns, TT can’t tell whether there is an excess distribution. But in the software I use, there are questions about how much in expenses the other party used for education credits or 529 distributions so that it can coordinate the two returns. Look carefully for such questions.</p>