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Form 1099-Q QTP -Grandparents paid

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    Form 1099-Q QTP -Grandparents paid

    Here are the facts: TPs grandson received Form 1099-Q for a QTP distribution in his name (the grandson). My clients, the grandparents, paid the gross distribution amount DIRECTLY to the institution. The grandson is NOT my clients dependent. So, who has to report the Form 1099-Q information on their tax return, the grandson or the grandparents? Do the grandparents get any benefit for their payment? Or is it just considered a gift to the grandson with no tax benefit to the grandparents? Thank you for your response.

    #2
    Should be no benefit for the payment, much like a Roth IRA, you contribute after tax dollars while the interest accrues tax free. The tax free interest is the benefit. No real reporting required, provided it was used to pay qualified tuition expenses and the tax free amounts are less than the education expenses. Just make sure and deduct the tax free amounts from any education expense entered on the 8863 to avoid taking a double benefit. Will want to separate the tax free interest from the basis when deducting those amounts.
    Last edited by Bob McCoy; 03-04-2015, 03:39 PM.

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      #3
      Originally posted by taxjungle View Post
      grandson received Form 1099-Q for a QTP distribution in his name
      who has to report the Form 1099-Q information on their tax return
      If any part of the distribution were to be figured as taxable, it would go on the grandson's return.


      Originally posted by Bob McCoy View Post
      deduct the tax free amounts from any education expense entered on the 8863 to avoid taking a double benefit. Will want to separate the tax free interest from the basis when deducting those amounts.
      I don't think there's a need to separate basis and interest and make a deduction from expenses entered on 8863.

      First figure any education credits, then deduct the costs used for the credit, then compare the remaining education costs to the QTP distribution. Some portion of earnings might be taxable, or maybe none.

      TTB 12-6 has the formula, and Pub 970 also lists the steps and has examples on how to coordinate tax credits and QTP distributions.

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        #4
        Originally posted by taxjungle View Post
        Here are the facts: TPs grandson received Form 1099-Q for a QTP distribution in his name (the grandson). My clients, the grandparents, paid the gross distribution amount DIRECTLY to the institution. The grandson is NOT my clients dependent. So, who has to report the Form 1099-Q information on their tax return, the grandson or the grandparents? Do the grandparents get any benefit for their payment? Or is it just considered a gift to the grandson with no tax benefit to the grandparents? Thank you for your response.
        I believe it would be either the grandson or whoever claims him. But I've never had a 1099Q, just know that's how the education credits work. See what others say.

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          #5
          Originally posted by BP. View Post
          If any part of the distribution were to be figured as taxable, it would go on the grandson's return.




          I don't think there's a need to separate basis and interest and make a deduction from expenses entered on 8863.

          First figure any education credits, then deduct the costs used for the credit, then compare the remaining education costs to the QTP distribution. Some portion of earnings might be taxable, or maybe none.

          TTB 12-6 has the formula, and Pub 970 also lists the steps and has examples on how to coordinate tax credits and QTP distributions.
          I stand duely corrected BP.

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            #6
            Wow, a 1099-Q that was actually issued correctly by the broker, and paid correctly! After how many years these things have been around? If there is any taxable amounts, they are reported by the grandson. Lower tax rate & all. One of the benefits of these plans, if they are done correctly.

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