1099Q

[David]

Do 1099Qs have to be reported even though all funds were used for education?

In the past I haven't reported 1099Qs if they were used 100% for education expenses. Now I'm hearing otherwise, that we are required to report them or else the TP may receive a letter from the IRS. As far as I know, none of my clients have ever received a letter regarding reporting of 1099Qs.

The 1099Q is in the name of the parent and dependent (beneficiary) but lists only the parent's ssn. The box is marked that says the distribution was not to the beneficiary. Also, the total amount of distribution is greater than the tuition amount on Form 1098-T because of room and board.

Given this situation and knowing that all of the funds were used for qualified education expenses, do I still need to report the 1099Q?

Thanks.

 

[NECPA in NEBRASKA]

I received a letter even though I reported the 1099Q and backed it out on line 21. I just responded that all of the money was used for tuition and room and board and they accepted it without any receipts for 2013. They need to find a better way to report the 1099Q's. We did not have any education credits, so maybe that is why they accepted my response without question. 

[SaraEA]

I agree that they need to find a better way.  I have had lots of clients receive letters on this matter, most of whom didn't take any education credits either.  The IRS instructions in the education pubs say you don't have to report anything.  Yet when the 1098Ts show lower amounts than the Qs, the IRS computers get in gear.  I believe that now that education credits are refundable and the expected fraud has ballooned, the whole education landscape is being targeted.  Unlike NECPA, I had to provide account transcripts from the schools, but all of the 529 distributions were eventually allowed.

I understand that you can request the 529 plan trustee to pay the school directly, but I don't know if that would help with the reporting discrepancies.  Never had a client do it.