1099-q

[oceanlovin'ea]

Client took money out twice in 2010. The first one was used to pay college expenses during the year. Then in December he took out money to pay the tuition due in January and he paid it in December.

He is asking since it is for 2011 tuition is there a way not to take this credit in 2010 but take it in 2011.

I don't think so since he both made the withdrawal and paid the college in December 2010.

But maybe you know something I don't since this is not something I am familiar with.

Thanks for your help.

Linda, EA

[AJsTax]

Not sure we can understand

why he would not want to show the tuition against the amount taken out of the account. If he does not put it towards school costs it will be taxable. And the second point being we are cash basis taxpayers as individuals so we must work with when the money was actually spent.
So my response would be that the money spent in December for January tuition, etc. must be shown in 2010. Which is the usual way.

[BP.]

is there a way not to take this credit in 2010 but take it in 2011.

What credit?

[oceanlovin'ea]

not wording it right

He wants to use the 1099Q on his 2011 taxes. I am not sure why.. I will send him an email in the morning and ask him to explain and will come back to this then.

Linda, EA

[BP.]

The 1099-Q's are both 2010, so . . .

But try this, and check pub 970:
Add up all the eligible education expenses including books, tuition, eligible room & board. Then apply whatever education tax credit (AOC, LLC) you are using against the expenses that are eligible for the credit. Then see what's left. If the distributions are less, you are ok. If they are more, then just a prorated portion of the 1099-Q earnings would be taxable. Plus, I think that education expenses paid in 2010 for the first 3 mos of 2011 can be included.

[AJsTax]

He wants to use the 1099Q on his 2011 taxes. I am not sure why.. I will send him an email in the morning and ask him to explain and will come back to this then.

Linda, EA

The 1099Q is an income reporting form, You can not just choose which year you want to report the income. at least most of the time you can't. In this case he must prove he had expenses paid with the distribution of the funds or it will be at least partially taxable.

[oceanlovin'ea]

back to the top

I have to finish this return in the next day or two (or kill my husband). (The man works with my husband and everyday my husband asks me if I have finished the return)

He took 2 distributions from the prepaid college fund, one in summer for fall tuition and one in December for spring tuition. He made the withdrawal in December and wrote a check to the school in December. It had to be paid by 1/3/2011.

He was hoping that the December distribution and payment could be claimed for 2011 since he will have more income in 2011. He has 1099Q for the distribution. He will take the AOC for first year college student.

But I have found nothing that would allow this. You have to report it in the year you receive the form.

Am I correct in my thought process? Or am I missing something?

Linda, EA