1099 q

[lovettw]

I have two (2) 1099 Q that shows gross dist in box 1; earnings in box 2; basis in box 3; box 5 is a state qualified tuition program and box 6 is checked which states the recipient is not the designated beneficiary. Based on what I have read the earnings in box two (2) are to be included as income on line 21 of the 1040. Am I correct?

[ATSMAN]

I have two (2) 1099 Q that shows gross dist in box 1; earnings in box 2; basis in box 3; box 5 is a state qualified tuition program and box 6 is checked which states the recipient is not the designated beneficiary. Based on what I have read the earnings in box two (2) are to be included as income on line 21 of the 1040. Am I correct?

If the distribution doesn’t exceed the amount of the student's qualifying expenses, then you don't have to report any of the distribution as income on your tax return. If the distribution exceeds these expenses, then you must report the earnings on the excess as "other income" line 21 form 1040 on your tax return. When you pay a student’s school expenses with these funds, you cannot claim a tuition deduction or either of the educational tax credits for the same expense.

I have seen box 6 checked even though the distribution was used to pay qualifying expenses. I think that happens because when the 529 plan was set up they did not specify that bene or left it blank?

[BP.]

When you pay a student’s school expenses with these funds, you cannot claim a tuition deduction or either of the educational tax credits for the same expense.

No, but what you can do with a 1099-Q distribution is first claim the eligible tax deduction or credit, and then see if any of the distribution's earnings will be taxable.

TTB p. 12-6, right column - Coordination with education benefits.

[lovettw]

There are no eligible tax deductions or distributions. The father received one distribution and the mother received the other. None of the distributions were expended for educational purposes for the assigned beneficiary. TTB chapter indicates that earnings listed in box two should be included as income on line 21 of the 1040. Correct? Looking for opinions.;

[ATSMAN]

There are no eligible tax deductions or distributions. The father received one distribution and the mother received the other. None of the distributions were expended for educational purposes for the assigned beneficiary. TTB chapter indicates that earnings listed in box two should be included as income on line 21 of the 1040. Correct? Looking for opinions.;

It's a shame that the distribution was not used as originally intended and now they have to pay the tax on the earnings, which they would have paid if they purchased a CD at the bank!

[BP.]

earnings listed in box two should be included as income on line 21 of the 1040. Correct?

Yes, that's correct. Might also be subject to penalty on Form 5329.