Form 1099-Q is sent to a taxpayer to report distributions taken from a Coverdell ESA, 529 plan or other Qualified tuition program.
More Information:
If money is withdrawn from a qualified tuition program such as a Coverdell ESA or 529 plan, the taxpayer will receive Form 1099-Q to report the distribution taken to pay for their expenses or their beneficiaries school expenses.
Not all distributions are taxable income. If the taxpayer withdrawals money from the plan and uses all of the money to pay for qualified school expenses, the distribution is not taxable. However, these expenses CANNOT be used to take a Tuition and Fees Deduction or Education Credit.
If some of the distribution is used to pay for school expenses, the portion for qualified expense is not taxable, the remainder of the distribution will be taxable on for 1040 Line 21 Other Income.
Form Instructions:NOTE: Non taxable distributions from Coverdell education savings accounts (CESAs) under section 530, and qualified tuition programs (QTPs) under section 529, including rollovers, are not required to be reported on your income tax return. You must determine the taxability of any distribution. See IRS Pub. 970 for more information.
Box 1.
Shows the gross distribution (including in-kind distributions) paid to you this year from a QTP or a CESA. This amount is the total of the amounts shown in box 2 and box 3. See Pub. 970 for more information.
Caution.
For CESA distributions (other than earnings on excess contributions) made during 2015, the payer/trustee is not required to report amounts in boxes2 and 3. Instead, the payer/trustee may report the fair market value of the CESA as of December 31, 2015, in the blank box below boxes 5 and 6. To figure your earnings and basis, use the Coverdell ESA—Taxable Distributions and Basis worksheet in IRS Pub. 970.
Box 2.
Shows the earnings part of the gross distribution shown in box 1. Generally, amounts distributed that are used to pay for qualified education expenses, transferred between trustees, or rolled over to another qualified education program within 60 days, are not included in income. Report taxable amounts as “Other Income” on Form 1040. Also see Form 5329 and its separate instructions.
Box 3.
Shows your basis in the gross distribution reported in box 1.
Box 4.
This box is checked if a trustee-to-trustee transfer was made from one QTP to another QTP, from one CESA to another CESA, or from a CESA to a QTP. However, in certain transfers from a CESA, the box will be blank.
Box 5.
Shows whether the gross distribution was from a QTP (private or state) or from a CESA.
Box 6.
The designated beneficiary is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account.