Adult kid filing taxes for first time - 1099T doubt

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rm
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Adult kid filing taxes for first time - 1099T doubt

Post by rm »

My adult son is filing taxes by himself

His 1099T shows 15K tuition and 10K as scholarship. He also earned ~9K as W2 income from summer.

Turbotax shows he will get a refund

We paid for his tution of 15K from his 529 plan.

Is there any double counting happening. Will we have to change our tax forms because he is filing his own taxes. For example, it seems we are paying for his tuition but it shows on his 1099T form.

Thanks
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enad
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by enad »

Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
Last edited by enad on Mon Mar 27, 2023 11:31 am, edited 2 times in total.
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arcticpineapplecorp.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by arcticpineapplecorp. »

In addition to whether you claim him or not, the scholarship could be considered income if he didn't use it for qualifying educational expenses because you paid the $15k tuition with the 529, not the scholarship.

In order to not count the scholarship as income (taxable) he would have to have spent it on qualifying educational expenses.
Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income...

What are qualified educational expenses?

To avoid a scholarship being subject to taxation, you’ll need to spend the funds on qualified educational expenses. Generally, this means tuition and fees required to enroll or attend the eligible educational institution. But it can also include costs such as course-related expenses like fees, books, supplies, and equipment required for courses at the institution.

The key requirement for having scholarships cover these course-related expenses tax-free, is that they must be required of all students in your course. They can’t be optional expenses you elect to pay that aren’t required to satisfy the requirements of the course or educational institution.
When are scholarships considered taxable income?

You might have some of your scholarship or grant count as taxable income under certain circumstances.
Taxable scholarship funds

Some scholarship funds are subject to taxation. If you have scholarship money left over after covering your qualified education expenses, you'll need to include that amount as part of your gross taxable income. That means scholarship money counts as income when calculating your tax liability when used to pay for:

Room or board
Utilities
And other non-qualified expenses (including school supplies not listed as required in your program).

If you have money left over after covering your qualified education expenses and use it on other costs, these funds generally count as taxable income. For example, if you use your scholarship funds for optional reading assignments that don’t go toward satisfying course requirements and aren’t required of every student, they would be subject to taxation.

source: https://turbotax.intuit.com/tax-tips/co ... /L2hWn0lpe
i know the scholarship is not in excess of the tuition, but he also didn't use it to pay the tuition if you paid it out of the 529.
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Pdxnative
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by Pdxnative »

There are qualified expenses for the 529 that aren’t reported on the 1098t. Room and board, fees, books, computer expenses. You can apply the 529 distribution to those expenses.

So if 10k room and board, 15k tuition: scholarship covers first 10k of tuition, 15k 529 distribution covers the rest.

Whether you are planning to take a tax credit like the aotc is relevant here too though, as that can’t overlap without tax consequences.

Check out pub 970 or lay out all the numbers here and people can help.

https://www.irs.gov/pub/irs-pdf/p970.pdf
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by Pdxnative »

Also if there were non-W2 stipends for teaching or research assistantships, those factor in.
marcopolo
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by marcopolo »

enad wrote: Mon Mar 27, 2023 8:44 am Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
This is not true.

If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
Once in a while you get shown the light, in the strangest of places if you look at it right.
peteyboy
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by peteyboy »

marcopolo wrote: Mon Mar 27, 2023 1:13 pm
enad wrote: Mon Mar 27, 2023 8:44 am Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
This is not true.

If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
+1
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by enad »

enad wrote: Mon Mar 27, 2023 8:44 am Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
This is not true.

If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
I think you misread what I wrote or assumed something that was not said. If all the monies were used for a qualified distribution Line 8 of your 1040 would be 0 or empty (if tax software was used). If there were unqualified distributions, the tax due would also show up on Line 8 of your 1040. Either way it's there and until you go through the worksheet (if doing by hand) or the interview process if using software you won't know.

OP, please go through the interview process if you are using tax software. Don't set the 1098T/1099Q''s aside. While someone may do so, they risk an audit, you shouldn't
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marcopolo
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by marcopolo »

enad wrote: Tue Mar 28, 2023 2:00 am
enad wrote: Mon Mar 27, 2023 8:44 am Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
This is not true.

If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
I think you misread what I wrote or assumed something that was not said. If all the monies were used for a qualified distribution Line 8 of your 1040 would be 0 or empty (if tax software was used). If there were unqualified distributions, the tax due would also show up on Line 8 of your 1040. Either way it's there and until you go through the worksheet (if doing by hand) or the interview process if using software you won't know.

OP, please go through the interview process if you are using tax software. Don't set the 1098T/1099Q''s aside. While someone may do so, they risk an audit, you shouldn't
So, you are saying that entering nothing on a tax form is "reporting" the withdrawals? OK, I guess.
You are mistaken about what shows up on line 8.
The "tax due" does not show up on line 8.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by enad »

delete
Last edited by enad on Sat Apr 01, 2023 12:34 pm, edited 1 time in total.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by ncbill »

enad wrote: Tue Mar 28, 2023 2:00 am
enad wrote: Mon Mar 27, 2023 8:44 am Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
This is not true.

If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
I think you misread what I wrote or assumed something that was not said. If all the monies were used for a qualified distribution Line 8 of your 1040 would be 0 or empty (if tax software was used). If there were unqualified distributions, the tax due would also show up on Line 8 of your 1040. Either way it's there and until you go through the worksheet (if doing by hand) or the interview process if using software you won't know.

OP, please go through the interview process if you are using tax software. Don't set the 1098T/1099Q''s aside. While someone may do so, they risk an audit, you shouldn't
What do you mean by "risk an audit?"

If they are qualified distributions no reporting is needed, so even though the IRS gets a copy it is not going to be an audit trigger as omitting a 1099 would be (well, more like a mismatch letter)
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by enad »

delete
Last edited by enad on Sat Apr 01, 2023 12:35 pm, edited 1 time in total.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by lstone19 »

peteyboy wrote: Mon Mar 27, 2023 1:22 pm
marcopolo wrote: Mon Mar 27, 2023 1:13 pm If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
+1
+2

To the OP, first off, it's a 1098-T, not a 1099-T. 1098s report expenses that you may be able to deduct or use to qualify for a credit. If using the expenses does not benefit you, there is no need to do anything with a 1098. OTOH, 1099s reports income that generally, you must include on your tax return (an exception is a 1099-G for a state or local tax refund - if you didn't benefit from the taxes paid, you don't report the income and just like mentioned above with a 1099-Q, there is no place to report it on your tax return if you're ignoring it because you have no taxable income from it).

OP said the 1098-T shows $15K tuition and $10K of scholarship. OP also stated that they paid the $15K tuition from a 529. Unmentioned is what other 529 qualifying expenses the son had such as room and board. Cash is, of course, fungible. We have $25K ($10K from scholarships and $15K from the 529). Is the total of tuition and other 529 qualifying expenses more than $25K? If so, unless you're also trying to qualify for a credit such as the AOTC, stop. No need to go further and no need to tell tax software anything about the 1098-T and 1099-Q. Tax software asks for lots of forms that it uses internally but is not part of what is sent to the IRS. If no taxable income results from the combination of scholarships and 529 distributions, the IRS will not know whether or not you told the tax software about the 1098-T and 1099-Q.

FWIW, I went through all this 10 years ago when my son was in college with a full-tuition scholarship. Most years, there was nothing to report (although I had my own spreadsheets with the accounting). His final year, because we had overfunded the 529 due to the scholarship, we cleaned out the 529 which did generate some taxable income but that was the only year.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by marcopolo »

enad wrote: Tue Mar 28, 2023 9:46 am
marcopolo wrote: Tue Mar 28, 2023 4:23 am You are mistaken about what shows up on line 8.
The "tax due" does not show up on line 8.
Then where does it show up?
Line 8 shows the taxable income from a variety of things aggregated together as "other income". This is added to all your income from things like wages, dividends, etc. The total taxable income is then used to compute taxes due lower down in the form. Line 8 does NOT show tax due.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by marcopolo »

enad wrote: Tue Mar 28, 2023 10:24 am
ncbill wrote: Tue Mar 28, 2023 10:07 am
enad wrote: Tue Mar 28, 2023 2:00 am
enad wrote: Mon Mar 27, 2023 8:44 am Are you claiming him on your taxes?

EDIT: If the distribution from the 529 is made out in his name, then the 1099 goes to him, if in your name it goes to you. As long as the monies were used for qualified distributions there is a place on the tax form that reflects that and it won't be counted as income on your taxes or his taxes but still has to be reported. Scholarships that pay for qualified educational expenses at qualified educational institutions generally don't count as taxable income. Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Who received the 1098T and the 1099Q?
This is not true.

If all the 529 withdrawal is used for qualified expenses, there is no place on the tax forms to report that. You maybe confusing it with entering it into your tax software, which asks about to determine if any of it is taxable (not used for qualified expenses). But, once the software determines all of it was used for qualified expenses, there is nothing to report because there is no place on the forms to report it. After going through this the first time, I stopped waiting my time entering any of the 1099T and 1098Q information into tax software all together.
I think you misread what I wrote or assumed something that was not said. If all the monies were used for a qualified distribution Line 8 of your 1040 would be 0 or empty (if tax software was used). If there were unqualified distributions, the tax due would also show up on Line 8 of your 1040. Either way it's there and until you go through the worksheet (if doing by hand) or the interview process if using software you won't know.

OP, please go through the interview process if you are using tax software. Don't set the 1098T/1099Q''s aside. While someone may do so, they risk an audit, you shouldn't
What do you mean by "risk an audit?"

If they are qualified distributions no reporting is needed, so even though the IRS gets a copy it is not going to be an audit trigger as omitting a 1099 would be (well, more like a mismatch letter)
Here's the flip side: What if there are unqualified distributions? Would you know that in advance or would you benefit from using a worksheet (IRS provided or tax software)? If you assume they are all qualified and ignore the exercise you're rolling the dice and risking an audit if you are caught, especially if you are audited for something else.

Put another way if it's meant to ignore 1098T's and/or 1099Q's, then tax software companies have invested needless time and money to account for those forms.
You might be shocked to hear that tax software companies invest a lot of money to put in support for all sorts of forms that many people don't need. That does not mean you need to fill all of them out just to discover you did not need them.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by enad »

delete
Last edited by enad on Sat Apr 01, 2023 12:34 pm, edited 1 time in total.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by marcopolo »

enad wrote: Tue Mar 28, 2023 5:33 pm
marcopolo wrote: Tue Mar 28, 2023 11:31 am
enad wrote: Tue Mar 28, 2023 9:46 am
marcopolo wrote: Tue Mar 28, 2023 4:23 am You are mistaken about what shows up on line 8.
The "tax due" does not show up on line 8.
Then where does it show up?
Line 8 shows the taxable income from a variety of things aggregated together as "other income". This is added to all your income from things like wages, dividends, etc. The total taxable income is then used to compute taxes due lower down in the form. Line 8 does NOT show tax due.
Glad you can admit that line 8 is where any taxes due from a 1099-Q would show up.
Do you not understand the difference between taxable income and taxes due?!?
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by lstone19 »

marcopolo wrote: Tue Mar 28, 2023 5:40 pm
enad wrote: Tue Mar 28, 2023 5:33 pm
marcopolo wrote: Tue Mar 28, 2023 11:31 am
enad wrote: Tue Mar 28, 2023 9:46 am
marcopolo wrote: Tue Mar 28, 2023 4:23 am You are mistaken about what shows up on line 8.
The "tax due" does not show up on line 8.
Then where does it show up?
Line 8 shows the taxable income from a variety of things aggregated together as "other income". This is added to all your income from things like wages, dividends, etc. The total taxable income is then used to compute taxes due lower down in the form. Line 8 does NOT show tax due.
Glad you can admit that line 8 is where any taxes due from a 1099-Q would show up.
Do you not understand the difference between taxable income and taxes due?!?
Apparently, enad does not.
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enad
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by enad »

marcopolo wrote: Tue Mar 28, 2023 5:40 pm
enad wrote: Tue Mar 28, 2023 5:33 pm
marcopolo wrote: Tue Mar 28, 2023 11:31 am
enad wrote: Tue Mar 28, 2023 9:46 am
marcopolo wrote: Tue Mar 28, 2023 4:23 am You are mistaken about what shows up on line 8.
The "tax due" does not show up on line 8.
Then where does it show up?
Line 8 shows the taxable income from a variety of things aggregated together as "other income". This is added to all your income from things like wages, dividends, etc. The total taxable income is then used to compute taxes due lower down in the form. Line 8 does NOT show tax due.
Glad you can admit that line 8 is where any taxes due from a 1099-Q would show up.
Do you not understand the difference between taxable income and taxes due?!?
[Unnecessary comment removed by admin LadyGeek. Discussions are about issues, not people.] Sorry, not buying your argument.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by lstone19 »

enad wrote: Wed Mar 29, 2023 2:42 am
marcopolo wrote: Tue Mar 28, 2023 5:40 pm
enad wrote: Tue Mar 28, 2023 5:33 pm
marcopolo wrote: Tue Mar 28, 2023 11:31 am
enad wrote: Tue Mar 28, 2023 9:46 am

Then where does it show up?
Line 8 shows the taxable income from a variety of things aggregated together as "other income". This is added to all your income from things like wages, dividends, etc. The total taxable income is then used to compute taxes due lower down in the form. Line 8 does NOT show tax due.
Glad you can admit that line 8 is where any taxes due from a 1099-Q would show up.
Do you not understand the difference between taxable income and taxes due?!?
[Unnecessary comment removed by admin LadyGeek. Discussions are about issues, not people.] Sorry, not buying your argument.
Enad, you're wrong. As Marcopolo asked, you apparently don't know the difference between taxable income and actual taxes. Everything on Form 1040 down to line 15 is the calculation of taxable income. It is only on line 16 that the tax on that taxable income is calculated. And that tax depends on a lot of other factors such as filing status and the type and amount of all the income above (qualified dividends, LTCG, etc.). And it is thanks to how tax is calculated that we could both have $1,000 on line 8 and I pay $0 in additional tax on it while you pay over $300.

It is because many people don't understand the difference taxable income and how taxes are calculated on it that many people can't complete even a simple tax return.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by LadyGeek »

The discussion is getting contentious. I removed an off-topic post and some comments. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones. Discussions are about issues, not people...

At all times we must conduct ourselves in a respectful manner to other posters. Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
The point regarding taxable income vs. taxes due has been made, let's move on.
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Re: Adult kid filing taxes for first time - 1099T doubt

Post by LadyGeek »

rm - has your question been answered?

If not, what would you like help with?
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