1099 q tax form
This is more of a question of pure curiosity and convenience. Why do 1099s have to be submitted on the special paper forms and not just printed out in multiple copies or purely digitally? Everything else can be edited or printed, but a 1099 is special requiring special printers and software even for a professional tax preparer.
You can print them on any IRS-approved paper, you don't have to use pre-printed forms.
The IRS publishes specifications for paper that is approved for use for these kinds of forms (109*, W*, etc).
Here's the reason why it is important:
Even the slightest deviation can result in incorrect scanning, and may affect money amounts reported for employees.
Note that some portions of these forms are in different color (1099-MISC copy A). This is important, and using incorrect color will affect the IRS OCR mechanisms.
Forms for individuals are less complicated with regards to technical specifications, because individuals must file them, and as such any complication will unnecessarily burden the citizenry. All the 109*, W* etc forms are not legally required to be filed by all citizens. You're only required to file them if you chose to do business, or chose to employ others. As such, using professional software and special forms is a cost of doing your business, and not a tax as it would be had it been mandatory to everyone.
Mistakes in individual forms due to OCR failure or something else will be noticed by the taxpayers (less/more refund, etc) or through the internal matching and cross-check.
However, forms 109* and W* feed that matching and cross-check system and are considered source of truth by it, and as such their processing must be much more reliable and precise.
Need Help understanding 1099-Q Form and Education Tax Credits
02-05-2017 12:44 PM
We have one son who is a Freshman in college. Number for his first semester:
$16,889 - Total of Tuition, books, other qualified expenses
$11,689 paid from 529 Qualified Education Program
$3,250 paid from merit scholarship
$1,950 paid out of pocket
First question is regarding the 1099Q forms we received for the 529 distributions. One form was sent to my son's name (who we claim as a dependant on our form) with total distributions of $10,490.53 (amount paid directly to the school), the other form is in my name in the amount of $1,199 (for qualified expenses not paid directly to the school). Does my son need to report any of the numbers on this form on his tax return (he had minimal income in 2016 - less than the taxable threshold)?
Second question is in regards to the education tax credit. My understanding is that we would qualify for the American Education Tax credit for qualified expenses we paid on behalf of our dependant son. However, only the $1,950 that we paid directly out of pocket (and not from the 529 plan or scholarship) would qualify for this credit. However, the H&R tax program we have (2016 deluxe) does not seem to be asking the correct questions in regards to tuition or how we paid it. In the only area I can find that asks for 1099Q information it only asks about taxable distributions and it only asks if they were made for me or my spouse. The distributions were not taxable (all were for qualified expenses) and they were made on the behalf of our son's eduction. Then, in the education credits section, there is no question that asks if any of the payments were made from a qualified education program. So, it's giving us to big of a credit because it's looking at all of the expenses (less the scholarship money), instead of just the amount we made out of pocket.
Am I understanding how the education credit should work and is there a way to enter the data correctly in HR Block so that it computes the credit correctly? It want's to give us a $2,500 credit and we really should only get $1,950 (if I'm understanding the rules of the credit correctly).
Re: Need Help understanding 1099-Q Form and Education Tax Credits
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02-08-2017 10:48 PM
I posted this in your other post as well so that hopefully you'll see it. The first step is to get your 1099-Q information out of the income section completely. You do not need to report the distribution at all since it was all used for education expenses. 529 funds can be used on qualifying expenses as well as room & board up to the extent that the educational institution normally charges. Once you've gone back over the income part then steps 3 through 15 will guide you through the rest.
I've recreated your scenario in the software and I've got this one all figured out for you. Please follow the steps below exactly:
- If 100% of your 1099-Q distributions were used for education expenses then go to the income section and delete anything you entered on a 1099-Q. The distribution does not need to be reported as income you used it all on education expenses, including room & board as it is 100% tax free.
- Go to the "credits" section of the interview.
- Select your dependent as the student on the first page of the education credit section. (You must have claimed your child as a dependent in order to claim their education credit).
- Answer the questions regarding the qualifications for the American Opprortunity Credit and then click "next".
- Tell the software you did not receive a 1098-T but that your child did attend a qualifying school and then click "next".
- Enter the school's information, your child's total qualifying expenses, and make sure you check that he or she was at least a half-time student.
- Click "next".
- Click "next".
- Enter the amount of financial aid received, inluding tax-free payouts from 529 plans. The instructions for the box do not mention 529 distributions, but because they are tax-free and unrestricted (they can be used on any college expense including room & board) they must be entered here in order to calculate the credit accurately).
- Click "next".
- Answer "NO" to both questions and then click "next".
- Enter the total you spent on textbooks in th appropriate box if you did not already include this amount with the qualifying expenses you entered in step 4.
- Click "next".
- Answer the question and then click "next".
- Welcome to the eduation credit summary. You're all done!
What you can do in order to claim more credit is claim the $3,250 scholarship as income on your child's tax return. This way you'll be able to claim nearly the maximum American Opportunity Credit. In order to do this, change the answer on the second question in step 11 to "YES" and enter $3,290 in the box. Then click through to the end of the education section without skipping anything and the credit will recalculate.