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Old 03-12-2018, 01:26 PM
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QTP 529 disbursement and 1099Q

My daughter Audrey graduated in 2015 and began paying loans. My wife and I took the American Opportunity education credit while she was in school. Part of Audrey's education was paid by a Scholars Choice QTP fund which was set up by her aunt and uncle in her own name. After graduation (2015) there still remained money in that 529 state plan. In 2017 the aunt had the funds distributed directly to Audrey, with these details on the 1099-Q: (box 1 distribution) $7050 (2 earnings) minus (-) $2199 (3 basis) $9250. From that distribution, Audrey immediately paid off the full balance of her student loan, $3162. The remainder went into her savings account. Box 2 'earnings' is a negative number, and the tax is supposed to be paid on the earnings - so possibly she does not need to report this at all.

At the least, we think she should be able to deduct the $3162, but are not sure where to enter that amount. We have already entered the $51 in student loan interest for 2017. Audrey is single, not a student, made $30k per year, with no other tax situations. Normally she would get a refund. THANKS. C


Last edited by CalicoSilver : 03-12-2018 at 01:33 PM. Reason: correction


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Old 03-12-2018, 01:31 PM
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minus $2199

I have tried three times to edit out the question mark. The should be minus or negative symbol. CS



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Old 03-13-2018, 07:02 AM
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My daughter Audrey graduated in 2015 and began paying loans. My wife and I took the American Opportunity education credit while she was in school. Part of Audrey's education was paid by a Scholars Choice QTP fund which was set up by her aunt and uncle in her own name. After graduation (2015) there still remained money in that 529 state plan. In 2017 the aunt had the funds distributed directly to Audrey, with these details on the 1099-Q: (box 1 distribution) $7050 (2 earnings) minus (-) $2199 (3 basis) $9250. From that distribution, Audrey immediately paid off the full balance of her student loan, $3162. The remainder went into her savings account. Box 2 'earnings' is a negative number, and the tax is supposed to be paid on the earnings - so possibly she does not need to report this at all.==============>> the amt in Box 1 shows the total funds distributed from her QTP account.
AND ALSO Box 2 shows the earnings that could be subject to taxation if SHE didn?t use them for qualified education expenses as required by federal law. The amt in Box 2 be taxable when the distributed funds were not used for qualified education expenses; the student beneficiary was changed to someone who is not an eligible family member of the original student beneficiary.

Or etc Other circumstances may apply.


At the least, we think she should be able to deduct the $3162, but are not sure where to enter that amount. We have already entered the $51 in student loan interest for 2017. Audrey is single, not a student, made $30k per year, with no other tax situations. Normally she would get a refund==============>>>if the distribution doesn?t exceed the amount of the student's qualifying expenses, then she doesn't have to report any of the distribution as income on her tax return. If the distribution exceeds these expenses, then she must report the earnings on the excess as "other income" on her tax return. When she pays her school expenses with these funds, she cannot claim a tuition deduction or either of the educational tax credits for the same expense. If a student is claimed as a dependent on another person's tax return, only the person who claims the student as a dependent can claim a credit for the student's qualified education expenses. If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit



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Old 03-13-2018, 10:16 AM
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Thanks for some information, we do appreciate it. I have to admit I am still confused. It seems now there are 3,4,5 different scenarios. I tried to provide a brief but accurate statement of her situation and the 1099Q, in hopes of a clearer answer. Is the distribution (1) taxable ? One source says it is the earnings (2) which are whats taxable.

The help files at Intuit says, "However, if annual distributions exceed your adjusted qualified education expenses, you may need to report some of the earnings reported in box 2 as income". If box 2 is a negative number, then it seems to me it can not be taxed.

Intuit also says, "If you create one of the accounts to put someone other than yourself through school, that student has no control over the funds and is not responsible for any of the tax consequences." --- This statement goes against others I have read, particularly if there is a cash disbursement as described in Audrey's case. A lot of conflicting information. Thanks



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Old 03-13-2018, 09:04 PM
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Quote:
Originally Posted by CalicoSilver View Post
Thanks for some information, we do appreciate it. I have to admit I am still confused. It seems now there are 3,4,5 different scenarios. I tried to provide a brief but accurate statement of her situation and the 1099Q, in hopes of a clearer answer. Is the distribution (1) taxable ? One source says it is the earnings (2) which are whats taxable.

The help files at Intuit says, "However, if annual distributions exceed your adjusted qualified education expenses, you may need to report some of the earnings reported in box 2 as income". If box 2 is a negative number, then it seems to me it can not be taxed.

Intuit also says, "If you create one of the accounts to put someone other than yourself through school, that student has no control over the funds and is not responsible for any of the tax consequences." --- This statement goes against others I have read, particularly if there is a cash disbursement as described in Audrey's case. A lot of conflicting information. Thanks
Is the distribution (1) taxable ?=======>>it depends; as said previously, if the distribution doesn?t exceed the amount of the student's qualifying expenses, then she doesn't have to report any of the distribution as income on her 1040;


One source says it is the earnings (2) which are whats taxable.=========>As said above. She, as a designated beneficiary, generally does not needto include in income any earnings distributed from a QTP if the total distribution is LESS than or EQUAL to adjusted qualified education expenses.

The help files at Intuit says, "However, if annual distributions exceed your adjusted qualified education expenses, you may need to report some of the earnings reported in box 2 as income". If box 2 is a negative number, then it seems to me it can not be taxed.====>correct, as said. I cannot demonstrate how to calculate taxable portion of the d/b from the QTP.You may follow the instruction of the software. Or you can contact the vendor for tech help.

Intuit also says, "If you create one of the accounts to put someone other than yourself through school, that student has no control over the funds and is not responsible for any of the tax consequences." ========> aslongas there is any taxable portion of earnings distributed, then it is taxable to the beneficiary. So if the recipient is the beneficiary, the income is taxable to her. So, it would be wise to keep a good record of these expenses just in case your return gets picked up for examination.

This statement goes against others I have read, particularly if there is a cash disbursement as described in Audrey's case. A lot of conflicting information===========>>as said above;



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Old 03-14-2018, 09:50 AM
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Thanks again for the response. I will have a chance to look at this again on Friday, and will read very carefully your responses. FYI, right now the software has Audrey not paying tax on any amount of the 1099Q - I am just trying to verify that so she can move forward.

THANKS again! C



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