Form 1099-Q

[Lion]

My first Form 1099-Q.

Form is in daughter's SSN from Scholars Choice College Savings Program.
Daughter is dependent of mother.
In round numbers,
$14,000 distribution
$2,000 earnings
$12,000 basis

$14,500 tuition & deposit
plus R&B $12,500
plus books, computer, supplies, fees $3,600

$5,250 scholarship

Daughter's only other income was SS $9,674 (father passed away).

So, am I reading TTB correctly, as well as my other sources, that daughter does NOT report 1099-Q amount. (Won't there be 1099 matching and a CP2000 letter or something?)

And, mother still has an ed credit or deduction to claim?

Mother's in 15% tax bracket.

[AJsTax]

Sounds Like It.

Let's run the numbers like this:
Total fees and tuition : 14,500
less scholarship: -5260
net balance tuition: 9240
less $4000 for AOC -4000
net balance: 5240.

add rm & brd 12,500
total expense to this: 17740.00

that is more than the total distribution from the education savings plan. So she does not acutally have to report the distribution. Do I usually report the numbers just to prove it?
Yes..
She can take the entire AOC and still be non taxable on the other. Deduct the scholarship from the Fees and tuition so none of the scholarship is taxable.

[Lion]

Thank you very much, AJ. That's how I was reading it. I have mother's written notes on payments, but she did include some January 2012 items, but designated them 2012. I'll call her to confirm, as I backed into R&B and want to make sure. Do computers count, or was that a one-year thing?

Daughter would not otherwise need to file (only SS), and 1099-Q is in daughter's SSN. So, I am allowed to NOT file a return for daughter and NOT report distribution?

Keep my computations in my file. Still have enough to give mother an ed credit or deduction (sometimes deduction works better for my clients since CT starts with federal AGI). Right?

[Lion]

After talking to the mother, I learn that the check came in her name, and that R&B was less than I thought.

So, after running the numbers, again rounded, that bottom line total expense is no longer 17,740 as AJ helped me with, but only 10,800 so less than the total distribution which will create a taxable portion of earnings.

Now, I take the earnings 1,800 X 10,800/14,000 = 1,400 or so tax-free earnings for
1,800 - 1,400 = 400 taxable amount

I put the 400 taxable amount on line 21
use Form 5329 to eliminate 10% penalty on taxable earnings using exception 1 or 2?

and report all this on mother's return, right?

Do I have a handle on this now? (I hate getting a new to me form in April when I'm sleep-deprived !!)

[Lion]

Wait a minute. I forgot about the computer. Does the purchase of a computer count as books, supplies, and equipment? If so, we're back over the $14,000 distribution and home free. Do I get to add in their computer purchase as a qualified expense for purposes of the 529 Plan distribution?

If so, then NOT report on mother's return. Or, do you report and then show another line for qualified expenses? (Yes, I am definitely keeping my calculations -- your calculations! -- in my file.)

[Lion]

I'm going to bump this, because I'm always nervous the first time I get a new issue. Thank you.