1099Q... why?

[Possi]

My client has been issued 2 1099Q's with gross dist and earnings of just $14 on one and just $10 on the other.

Trustee to trustee transfers are cked on both, as are "state" and "not the designated bene".

Since they are trustee to trustee transfers, I would think they are not reportable, but the directions for Bx2 say to include it as "other income."

I think this is a communist plot to drive me directly out of my mind just before I go on vacation......

To report or not to report.. that is the question......

[David1980]

Well, it says:

Box 2. Shows the earnings part of the gross distribution shown in box 1.
Generally, amounts distributed are included in income unless they are
used to pay for qualified education expenses, transferred between
trustees, or rolled over to another qualified education program within 60
days. Report taxable amounts as “Other Income” on Form 1040.

Adding some emphasis:

Report taxable amounts as “Other Income” on Form 1040.

So it's correct, any taxable amounts go to other income. You have no taxable amount, thus nothing to enter anywhere (as it's trustee to trustee).

[Possi]

trustee to trusteeeeee

That's what I thought, but I'm "shortin' out" on brain cells today. (Like that is different from any other day...)

Thanks for the confirmation!

[joanmcq]

They are getting the 1099-Qs because they are 'not the designated beneficiary'. The distributions are supposed to go to the beneficiary or directly to the institution, or you get a Q.

The idea was, that even if not used for 'qualified' education expenses, the amount would be taxed at the beneficiarie's supposedly lower rate (before the kiddie tax was tweaked up to age 24). Remember your tax history, and it makes sense.

[Possi]

Same channel. different show

They are getting the 1099-Qs because they are 'not the designated beneficiary'. The distributions are supposed to go to the beneficiary or directly to the institution, or you get a Q.

The idea was, that even if not used for 'qualified' education expenses, the amount would be taxed at the beneficiarie's supposedly lower rate (before the kiddie tax was tweaked up to age 24). Remember your tax history, and it makes sense.

This year, the same 1099Q does NOT mark box 4 "trustee-to-trustee transfer"
Box 5= qualified tuition program (state) is marked
and
Box 6 "the recipient is not the designated beneficiary" is marked.

Box 1= 21k
Box 2 earnings= 3135
Bix 3 Basis = 17864.

so Box 2 is "other income"


BUT...
the 1099Q is in Mom's name.
And Mom has a 1098T for daughter in excess of 17k.

I must be thick. I just don't get it. Why is this in Mom's name, and is any of it taxable?

[joanmcq]

Because mom told the fund to send the check to her. The fund doesn't know if there are qualified education expenses, or if she wants to take a vacation.

The earnings aren't taxable if there are qualified ed expenses. But you might get a CP2000 notice since the 1099-Q is under mom's social. So be prepared for it, and make sure you have documented education payments to the college, not just the 1098-T. And don't forget that for 529 plan distributions, room & board and books, supplies, etc are all qualified expenses. Since the distribution was more than the tuition, you'd want to see invoices from the school anyways.

[BP.]

is any of it taxable?

http://www.irs.gov/pub/irs-pdf/p970.pdf

Look at p.56 in pub 970 for how to coordinate the education credits with a 529 distribution, and how to figure any taxable portion of the 1099-Q earnings.

[Possi]

thanks

... for the responses...

I have some homework to do on this one.

[geekgirldany]

I just went through the same thing. Client got 1099-Q in his SS#. He paid out just enough where it would not be taxable. I told him to make sure he keeps copies of everything related to the tuition, books, etc.