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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My daughter received a 1098T($498.00) and 1099Q($1,920.10)-Gross

Resolved Question:

My daughter received a 1098T($498.00) and 1099Q($1,920.10)-Gross Distribution, ($79.90)-Earnings, & ($2,000.00)-Basis. What dollar amount do I need to put on Line 21
of her 1040 form as other income. She earned $11,103.61 on W-2. Would a form 8863 or 8917 be beneficial for her? Please help...
Submitted: 4 years ago.
Category: Tax
Expert:  TaxMomNJ replied 4 years ago.

Yamom,

 

How old is your daughter? What year of college is she in? How much of the $1,920 did she actually use for college?

Customer: replied 4 years ago.
My daughter is 21 years old. Only $498.00 was used for college. She will graduate in May of this year with an Associates in Early Child Care. She graduated High School in 2006.
Expert:  TaxMomNJ replied 4 years ago.

I am going to opt out and let an expert with a better grasp on 1099-Q's help you with this one.



Edited by TaxMomNJ on 2/23/2010 at 1:54 AM EST
Customer: replied 4 years ago.

OK, Thanks anyway. Just have them E-mail an answer if possible.
Customer: replied 4 years ago.
Relist: I still need help.
I did not receive an answer to my question yet. The expert decided to pass and let someone else answer the question who had better knowledge on 1099Q and 1098T.
Expert:  Lev replied 4 years ago.

The form 1099-Q reports distributions from qualified tuition programs under section 529.

In your situation - $1,920.10 - Gross Distribution - is less than original contribution - $2,000.00 - Basis.

 

Because contributions to such programs are not deduced from taxable income - the distribution of the basis is not taxable income - and there is nothing to report on the line 21.

 

According to your information - the form 1098-T reports tuition expenses - $498. However before you would be eligible to claim educational credit - we need to be sure that the distribution from qualified tuition programs $1,920 was used for qualified educational expenses.

From your information - it is not clear how these money were used.

 

Customer: replied 4 years ago.
Out of the $1,920.10 only $498.00 was used to pay for college classes. The rest of the money was originally deposit into a savings account.
Expert:  Lev replied 4 years ago.

Your original contribution was from after-tax money - so - there is no earnings and there is no taxable income.

 

Because your educational expenses were paid with the distribution from the qualified tuition account - same expenses may not be used to claim an educational credit.

 

Let me know if you need any help.

 

Customer: replied 4 years ago.
So, on line 21 of her 1040 form I do not need to report anything. I just need to keep the 1098T and 1099Q for my records. And I should not worry about taking the Hope credit
or Opportunity credit...Is this right.
Expert:  Lev replied 4 years ago.

So, on line 21 of her 1040 form I do not need to report anything.

Yes - that is correct - as long as there is no earnings - there is no taxable income regardless how the distribution is used.

 

I just need to keep the 1098T and 1099Q for my records.

Yes - the form 1099Q provides you a proof that there is no earnings on that account.

 

And I should not worry about taking the Hope credit or Opportunity credit.

Yes - as long as you had a distribution from the qualified tuition account - and that amount was not fully used to pay qualified educational expenses - you may not use same expenses to claim any other educational credits.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22640
Experience: Taxes, Immigration, Labor Relations
Lev and 5 other Tax Specialists are ready to help you
Expert:  Lev replied 4 years ago.

Some corrections...

Please take a look at IRS publication 970 page 68 - http://www.irs.gov/pub/irs-pdf/p970.pdf

Coordination With American Opportunity, Hope, and Lifetime Learning Credits
An American opportunity, Hope, or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit.

 

So you may use your tuition expenses - $498 for any educational credit - but in this case part of the distribution from a QTP might be taxable - however because there is no gain in your account - nothing would be taxable for you.

Please see example on the same page.

Sorry for confusion.

Let me know if you need any help with reporting.

 

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