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Any accountants here? I have a question about 529 plans, 1099Q and filing income tax.
Posted on 4/1/19 at 11:00 pm
Posted on 4/1/19 at 11:00 pm
Sorry, this is the first time I explored the money tab of Tiger Droppings. If I need to look somewhere else, please let me know.
I have a 529 plan for each of my two children. I use Turbo Tax and I'm not sure if I should include the distributions on my income tax if the money is used for eligible expenses. I didn't include it when filing my 2016 taxes. Since then, I received conflicting advice, so I included the 1099Q form on my 2017 taxes and went back and amended 2016 to include it. Now it's time to file again and I'm still unsure.
Any help would be appreciated. Thanks.
I have a 529 plan for each of my two children. I use Turbo Tax and I'm not sure if I should include the distributions on my income tax if the money is used for eligible expenses. I didn't include it when filing my 2016 taxes. Since then, I received conflicting advice, so I included the 1099Q form on my 2017 taxes and went back and amended 2016 to include it. Now it's time to file again and I'm still unsure.
Any help would be appreciated. Thanks.
4
Posted on 4/2/19 at 6:36 am to Pistol 23
LINK
quote:
Calculating taxable amount
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" 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.
Posted on 4/2/19 at 8:33 am to Pistol 23
Yes, you have to report it, but there shoudl also be a field to enter qualified expenses to offset the distribution so it won't be taxed.
If you don't report it, you'll get a notice from the IRS in a few months where they'll tax the entire distribution.
If you don't report it, you'll get a notice from the IRS in a few months where they'll tax the entire distribution.
Posted on 4/2/19 at 9:10 am to Pistol 23
Don't feel bad, it's complicated. This is because, the IRS doesn't have a form to report these. (Unlike HSA distributions, for example).
You only have taxable income to the extent you don't spend the entire amount of the distribution on qualified expenses - and the list of qualified expenses is pretty liberal.
If you don't spend all of your distribution on qualifed expenses, then the earnings are taxable - but only in the ratio of earnings to total distributed, compared to the ratio of amount spent on qualified expenses to total distribution.
Example - You take a distribution of $12,000, but only spend $9,000 on qualified expenses. Your 1099-Q reports $10,000 of basis and $2,000 of earnings.
You spent 9000/12000 = 75% of your distribution on qualified expenses. Meaning you didn't spend 25%. Thus, 25% of your earnings = 25% times $2,000 = $500 is taxable and reported as other income.
I don't use Turbotax but there should be a screen somewhere that walks you through this calculation.
You only have taxable income to the extent you don't spend the entire amount of the distribution on qualified expenses - and the list of qualified expenses is pretty liberal.
If you don't spend all of your distribution on qualifed expenses, then the earnings are taxable - but only in the ratio of earnings to total distributed, compared to the ratio of amount spent on qualified expenses to total distribution.
Example - You take a distribution of $12,000, but only spend $9,000 on qualified expenses. Your 1099-Q reports $10,000 of basis and $2,000 of earnings.
You spent 9000/12000 = 75% of your distribution on qualified expenses. Meaning you didn't spend 25%. Thus, 25% of your earnings = 25% times $2,000 = $500 is taxable and reported as other income.
I don't use Turbotax but there should be a screen somewhere that walks you through this calculation.
Posted on 4/2/19 at 10:02 am to The Spleen
quote:
If you don't report it, you'll get a notice from the IRS in a few months where they'll tax the entire distribution.
We never reported distributions through 4 years of undergrad for 2 students, or the master's and EdS program for one, and we've never received that. My understanding has always been you only report if the money was not used for qualified expenses. However, if you are audited for any reason, you will need the backup to show those expenses were qualified.
Posted on 4/2/19 at 10:16 am to Pistol 23
quote:
Sorry, this is the first time I explored the money tab of Tiger Droppings
best board by FAR on this site
loaded with ballers
quote:
If I need to look somewhere else,
nah, someone here can help you. we have tons of experienced professionals at all levels here
we have accounting/tax gurus, banking related gurus, investing gurus, advisory gurus, business ownership gurus, etc.
Posted on 4/2/19 at 3:37 pm to Fat Bastard
Thanks for the assistance folks. I appreciate the help.
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