Form 1099-Q

[Lion EA]

Form 1099-Q has student's name.  Recipient's taxpayer ID# that is NOT student and NOT either parent.  Distributions over $25,000.  Expensive school, so tuition net of scholarships is nearly $33,000.  I'm lost already.  Please point me in the right direction to college distributions and college expenses on student's return &/or parents' joint return.  (At least no divorce in the picture!)  Don't know if grandparent funded the 529 plan.  Want a road map before I call parents.  Thank you.  

[NECPA in NEBRASKA]

If this is the only 1099Q, then you first deduct the scholarships and then the distributions. The remainder plus any books and eligible fees would be left for tuition credits or tuition deduction. You have to check out the cashier's transactions to see if it was all paid in 2016. I don't remember if you are using ATX or not, but it gets deducted on the education expense detail page for ATX.

[Catherine]

Also, if the parents have not exceeded the income limits for claiming AOTC, take a look at using some of the 529 distribution as *taxable* income in order to get the credit.  And correct for basis (assuming parents funded the plan)!  You can take a small income tax hit of a couple hundred bucks in trade for a larger credit.  

[Lion EA]

Thank you.  The recipient's SSN is NOT the student and is NOT either parent and is NOT the younger sister.  What do I need to know about that?!

[NECPA in NEBRASKA]

I don't think that you need to worry about it as long as they are not your client. Hopefully, they kept a copy of it. I always show i the distribution on line 21 with another to 0 it out, if it's not taxable on the return with the SS#. 

[Lion EA]

Do I report the distribution on the return of the recipient?  If so, I'm not preparing the return of the recipient.  To the person addressed?  That's the student who spent it all on education -- so do I report anything?  Or to the parents who claim the student as a dependent?  (Now with the amounts as scholarships and distributions, I'm going to have to work on a support sheet.  That doesn't happen much in Fairfield County, but the parents are entertainers with fluctuating incomes and a family of four while student had nearly $47,000 worth of scholarships, distributions, earned income, dividends, and interest.)  One of three families that want their returns before the weekend to go on spring break.

[jklcpa]

I don't think you have to worry about it if the recipient isn't your client because that's whose return it would be reported on.  The ones I've seen have had the funds paid out in the student's name so that it's reported to the student who then turns over the funds to parents that are paying the bill.  

Sometime if you are interested, Pub 970 explains the Coverdell and QTP payouts very nicely, and includes an example of how to reduce the qualify education expenses by any that were used by the parents in calculating any education credits claimed on their return. The QTP chapter was only about 4 or 5 pages that I easily followed that for the last one I did. Again though, I don't think you will be doing anything with the one you have if it is in someone else's name.

[Lion EA]

It's in the student's name, but it's not his SSN.  Not the SSN of his parents or sister, either.  Was addressed to student.  Recipient is an unknown SSN.

[Lion EA]

So, the 1098-T is reported on the parents' return when the student is their dependent, right?

But, the 1099-Q is not reported on the parents' return?

[Lion EA]

I downloaded Pub 970 to my desktop.  I have a lot of clients with college kids, but almost none that have had 529 plans (and not sure about this one!!).  Parents claim student so get to take ed credits -- still lots of tuition monies paid after grant and after 529 distribution to student (or to unknown SSN person).  But, if the 529 distribution had been larger than ed expenses, the taxable earnings would be on the student's return, right?  Freshman, so I'll have more years with this one; hope they correct the SSN before next year.

And, yes, I understand that I can report more taxable income on student's return to save ed benefits for parents, but don't need any more for this family situation.

[grmy2h]

Don't forget....529's can be used for R & B.