What Is Form 1099-Q?
Form 1099-Q: Payments From Qualified Education Programs is a crucial document provided by the IRS to individuals who receive distributions from a Coverdell education savings account (ESA) or a 529 plan. These distributions, including rollovers, may be taxable, and the form helps determine any potential tax liability. The form is used to assist in completing both federal and state tax returns if the distributions received are subject to tax.
Key Takeaways
- Individuals receiving distributions from a Coverdell education savings account or 529 plan are issued a Form 1099-Q.
- The form identifies the gross distribution amount made from the account during the reported year.
- Officers or employees controlling a state or qualified educational institution’s program, or anyone making a distribution from a 529 plan, should file this form.
- Information from the 1099-Q only needs to be included in your tax return if the distributions are taxable.
Who Can File Form 1099-Q?
Form 1099-Q should be filed by officers or employees managing programs established by a state or qualified educational institution, or by anyone distributing funds from a qualified tuition program (QTP), such as a 529 plan. ESAs and QTPs are tax-advantaged investment accounts designed to cover qualified higher education expenses. The form indicates the amount made from the account in gross distributions within the reported year. These distributions are then compared to the educational expenses incurred over the same period.
If the gross distributions exceed qualified education expenses, the excess is taxable and must be reported on the tax return. If expenses surpass the distributions, the excess amount can be applied toward an education tax credit.
Form 1099-Q will be issued to the beneficiary—such as when a 529 plan distribution is paid to the student beneficiary, the school, or a student loan provider. Any taxable distribution amount will be reported on the beneficiary’s income tax return. Distributions used for nonqualified expenses are subject to income tax and a 10% penalty on the earnings portion.
Young students might often fall below the federal income tax reporting threshold, resulting in little or no tax due on these distributions. Always ensure that the recipient of the funds, whose Social Security number is on the form, includes the 1099-Q on their tax return.
How to File Form 1099-Q
Form 1099-Q must contain the payer/trustee’s name, address, telephone number, and tax identification number (TIN), as well as the recipient’s name, address, account number, and TIN, typically their Social Security Number. The form includes six numbered boxes:
Box 1. Gross distribution from a QTP or ESA, whether in cash or in-kind, including items such as tuition credits or vouchers. The amount is included in income if it involves transfers or rollovers exceeding one per 12-month period for the same beneficiary or if the new beneficiary is not a qualifying family member.
Box 2. Displays the total earnings amount.
Box 3. Shows your basis in the distribution, equal to box 1 minus box 2.
Box 4. Indicates if this is a trustee-to-trustee transfer, which can include rollovers from a QTP to an Achieving a Better Life Experience (ABLE) account. Rollovers are permitted without penalty or income tax if completed within 60 days.
Box 5. Checks off the type of account involved.
Box 6. Notes whether the recipient is the designated beneficiary.
Three copies of the 1099-Q exist: the distributor files Copy A with the IRS, sends you Copy B, and retains Copy C. Ensure you receive Form 1099-Q in the mail or contact your distributor if you haven’t yet received it.
If distributions are not taxable, there’s no need to report them on your tax return, but you should retain the form for your records. Taxable amounts should be added to Line 8z of Schedule 1 and attached to Form 1040, while retaining your 1099-Q copy for your records.
Reporting 1099-Q on Your Tax Return
Form 1099-Q helps determine if taxes are owed on distributions from your improvement education savings accounts. If it indicates no taxes are owed, it won’t need to be included in your tax return.
Who Files a 1099-Q, the Parent or the Student?
The recipient of distributions from an education plan, either the parent or the student, files Form 1099-Q depending on who receives the funds. If the money is paid directly to the school, the student recipient fills out the form.
Do 529 Withdrawals Count As Income?
Withdrawals from a 529 plan on the contributed amount don’t count as taxable income since the amount was pre-taxed. Earnings do not need to be taxed unless withdrawals exceed the adjusted qualified education expenses for the year.
The Bottom Line
Form 1099-Q ensures proper tax reporting on distributions from your education savings accounts like ESAs or 529 plans. Ensure you include any taxable amount on your tax returns and seek advice from a professional tax advisor if needed to navigate your obligations effectively.
You can obtain Form 1099-Q directly from the IRS website here.
Related Terms: Schedule 1, Form 1040, education tax credit, qualified tuition program, ABLE Account.
References
- Internal Revenue Service. “About Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530)”.
- Internal Revenue Service. “Topic No. 313 Qualified Tuition Programs (QTPs)”.
- Internal Revenue Service. “Topic No. 310 Coverdell Education Savings Accounts”.
- Internal Revenue Service. “Instructions for Form 1099-Q: Payments From Qualified Education Programs (Under Sections 529 and 530)”.
- Internal Revenue Service. “Instructions for Form 1099-Q: Payments From Qualified Education Programs (Under Sections 529 and 530)”, Page 2.
- Internal Revenue Service. “Publication 970, Tax Benefits for Education”, Pages 47, 53.
- Internal Revenue Service. “Instructions for Form 1099-Q: Payments From Qualified Education Programs (Under Sections 529 and 530)”, Page 1.
- Internal Revenue Service. “Who Should File a Tax Return”.
- Internal Revenue Service. “IRS Provides Tax Inflation Adjustments for Tax Year 2024”.
- Internal Revenue Service. “Form 1099-Q, Payments from Qualified Education Programs (Under Sections 529 and 530)”.
- Internal Revenue Service. “Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses under Section 529”, Page 3.
- Internal Revenue Service. “Publication 970, Tax Benefits for Education”, Page 49.
- Internal Revenue Service. “1040 (and 1040-SR) Instructions”, Page 87.
- Internal Revenue Service. “Publication 970, Tax Benefits for Education”, Pages 51-53.
