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Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 3471
Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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Before entering our 1099-Qs, we had a Federal Refund in the

Customer Question

Before entering our 1099-Q's, we had a Federal Refund in the amount of $3669 and a State refund in the amount of $2396. We are using Turbo Tax. Combined amounts of 1099-Q's are roughly $9000 in Box 1, $3100 in Box 2 and $6000 in Box 3. Our daughter is the Designated Beneficiary of these funds, however we were the recipient. After I enter these amount of Federal refund is reduced to $947 and our State refund to $2318.

All of these distributions were used for qualifiable expenses. Why is this happening?
Submitted: 5 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 5 years ago.
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

Part of the distribution could be taxable due to part of the distribution having to be included in your income. SEE ADJUSTED QUALIFIED EDUCATION EXPENSES BELOW.


To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses.

Adjusted qualified education expenses. This amount is the total qualified education expenses reduced by any tax-free educational assistance. Tax-free educational assistance includes:

The tax-free part of scholarships and fellowships (see chapter 1),

Veterans' educational assistance (see chapter 1),

Pell grants (see chapter 1),

Employer-provided educational assistance (see chapter 11), and

Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

Taxable earnings. Use the following steps to figure the taxable part.

Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year.

Subtract the amount figured in (1) from the total distributed earnings. The result is the amount the beneficiary must include in income. Report it on Form 1040 or Form 1040NR, line 21.
Expert:  Tax.appeal.168 replied 5 years ago.
For more detailed info and examples, you can refer to the following IRS webpage: