529 Plan

[Randall]

Grandparent contributed to 529 account with grandchild as student beneficiary. Grandparent received a distribution, paid college directly. 1099-Q sent to grandparent.

Can the funds be paid directly to college in future and 1099-Q issued to student beneficiary?

So far, I've only seen 1099-Qs issued to student beneficiaries. Grandparent doesn't want the money to go directly to grandchild to ensure money is paid to college.

[Guest Taxed]

Generally speaking you can have the 529 plan make a distribution to the account owner (grandparent) or the beneficiary (grandchild). You know whose ss# will be on the 1099-Q. If you have the distribution made directly payable to the college, it may affect the financial aid the student may be receiving. If that is not going to be an issue in your case, then that is an option.

That is the reason most 529 plan distributions are made payable to the student beneficiary with their ss# on the 1099-Q.

[Jack from Ohio]

If the funds are actually used for education expenses, it does not matter who receives the 1099Q. No tax consequences if the funds are used for education.

It will make no difference, and getting the changes done will probably be a nightmare.

[Guest Taxed]

You are correct. It makes no difference who receives the 1099Q as long as the distribution is used for the qualified purpose.

I recommend the 1099Q in the student's name. I think in this case there is a fear that the sudent will misuse the funds??

[Randall]

My biggest concern is that the grandparent is not fully aware of any aid and not aware of the parents receiving the education tax credits. These amounts must be deducted from the qualified education expenses before calculating how much of the earnings reported on the 1099-Q will or will not be taxable. Jack is right on trying to get any changes done. I don't see a problem with the grandparent receiving the money (then paying the ed exp) and receiving the 1099-Q. I just need the additional info to calculate the taxable portion, if any.

[Terry D EA]

it would seem that the only way you will know what the actual expenses incurred would come from the 1098T form issued by the educational institution.

[Margaret CPA in OH]

Unfortunately not all 1098T forms have the details about what the charges were for what year and when payments were made. University of Cincinnati is one of the few that I note has calendar charges and payments listed. Often Box 1, I think, has charges billed for future terms but not necessarily payments made in that year. I advise details listing charges paid for appropriate expenses.