Tax Form 1099-Q Explained || 529 Plan Withdrawal
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- เผยแพร่เมื่อ 1 ม.ค. 2025
- What is Tax Form 1099-Q and do you need to report it on your Tax Return 1040?
Taxes Explained!
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----------DISCLOSURE-----------
The information presented in this video is for informational and educational purposes only. It is not intended to render tax advice for any specific situation. Those needing assistance with a specific situation should consult with a qualified Tax Professional.
The information in this video is based on current tax law and IRS regulations as of the date of publication and is subject to change.
Thank you, as someone who just graduated HS and is going to college soon with barely any tax knowledge, this is very helpful. Thanks!
Wow, I am so impressed with you @aleppo1! If you are starting to learn about it right after HS, you will definitely do well in life. I am so glad you found it helpful🍀
Very helpful video. Thank you.
Excellent! Thank you! All my costs from this went to my kids college, so I am glad I don't have to worry about figuring out how to fill out the form for taxes.
Thanks! But do I need to submit some forms or save receipts or documents from my sons’ college to prove to IRS all the distribution used for qualified education? If not, how they know/verify? Just be cautiously to avoid of audits
Thank you for your question @mailannguyen59,
You don't need to submit forms or receipts to the IRS when you withdraw from a 529 plan. However, you do have to keep detailed records, including receipts and documentation from your son's college, to prove that the distributions were used for qualified education expenses if the IRS requests them during review or an audit.
Here is a helpful IRS 529 Presentation with Examples:
www.irs.gov/pub/taxpros/2023ntf-03-1099-q-what-do-i-do.pdf
It's similar to being a sole proprietor: you need to keep track of your income, cash flow, and expenses. You report these yourself, and only in the case of a review or audit would you need to produce the records.
General 529 (or otherwise called Qualified Tuition Program) info on the IRS website:
www.irs.gov/taxtopics/tc313
Pub 970 Tax Benefits for Education - 529 Specifict
www.irs.gov/pub/irs-pdf/p970.pdf#page=50
Thank you and good luck!🍀
Thanks very much for your response.
Sorry I just got to it @mailannguyen59
One more thing is worth mentioning is that the IRS also receives a copy of the 1098-T for your son, who I assume you claim as a dependent. This form shows the tuition paid in Box 1 (less any scholarships in Box 5).
If the tuition paid is, for example, $10,000 and the 529 withdrawals are around that amount or less, it looks reasonable and well-matched.
However, if the tuition is $5,000 and the 1099-Q withdrawals are $25,000, it could raise questions.
However, you could also withdraw 529 funds penalty-free up to $10,000 to pay off student loans and amounts up to a scholarship received. Here is more info on that. th-cam.com/video/NG60yoODk0k/w-d-xo.html
Hi Aki, I really appreciate your time to give me more info 🙏 I have learned a lot since I found your channel 🥰 Actually, I don’t have 529, but Coverdel ESA for my son and I think the distribution for education purposes will be treated as the same. Since my son name is in the 1098T form, I guess his name is also in 1099Q form, even I am the owner of the account and requested the distribution deposit to my bank account, then pay for his college. Is it correct? Because if they put my name on 1099Q form, IRS can’t verify the amount fund withdrawal with the tuition I paid for my son on his 1098T.
@mailannguyen59 That's interesting you mentioned that. 2023 was the first year we withdrew funds from our 529 plan for our son’s freshman year in college. We did it twice: once by transferring funds from the IL 529 BrightStart account to our bank account, and once directly to the school.
You're right-we received two 1099-Q forms: one in our son’s name and one in ours. When the funds were deposited directly to the school, the form was in our son’s name; when deposited to our bank account, it was in our name.
This is normal and shouldn't cause any issues. Here's why:
Reporting for the Beneficiary: The 1099-Q reports distributions from the 529 plan to the designated beneficiary. Since the funds went directly to the school for the child's education, the beneficiary information is reported accordingly.
Tax Implications: As long as the distribution is used for qualified educational expenses, it remains tax-free, regardless of whose name is on the 1099-Q.
I am glad you found the information helpful! Cheers & Good Luck🍀
'Promo sm' 😝