What is Form 1099-Q: Payments from Qualified Education Programs?
The IRS sends Form 1099-Q to persons who receive dividends from a Coverdell education savings account (ESA or CESA) or 529 plan. Rollovers and other distributions may be taxable; thus, you must use IRS data to calculate the tax due. Taxpayers use the form to file federal and state taxes if distributions are taxed.
Form 1099-Q: Who Can File?
Officers or employees who control a state or qualified educational institution program should complete Form 1099-Q. Any individual who has made a payout from a 529 plan, also known as a capable tuition program (QTP), can submit it.
Tax-advantaged investment accounts, such as CESAs and QTPs, can cover eligible higher education costs. The fund reports gross distributions for the year on a 1099-Q form. We compare these gross payouts to annual educational costs.
Taxpayers must disclose gross distributions that exceed eligible school expenditures on the tax return, as these distributions are taxable. Individuals can apply the excess to an education tax credit if costs exceed payouts.
Form 1099-Q will be provided to the beneficiary student if the school, beneficiary, or student loan provider receives the $529 payout. The beneficiary will disclose any taxable payout on their income tax return. Nonqualified distributions are taxed and penalized by 10% of the profits.
It is sometimes unclear whether the beneficiary student or the account owner (a parent or relative) utilizes the 1099-Q for their tax return. The recipient of the monies must disclose the 1099-Q on their tax return using their Social Security number.
Unlike if the beneficiary is someone other than the student using the educational funds, the student or beneficiary will likely pay little or no tax on distributions. Additionally, younger students generally do not meet the federal income tax reporting level.
How to File 1099-Q
Form 1099-Q requires the payer or trustee’s name, address, phone number, and TIN, as well as the recipient’s name, address, account number, and TIN (usually their Social Security number).
The form has six numbered boxes.
1: displays the annual gross distribution of cash or in-kind products from QTPs or CESAs, such as tuition credits, certificates, vouchers, exemptions, or similar items. If there has been more than one transfer or rollover for the same beneficiary during 12 months or if the beneficiary changed and is not a family member, the QTP includes the sum in income. If the designated beneficiary changes and is not a family member or over 30 (except for special needs beneficiaries), the CESA includes the sum in income.
2: View complete earnings here.
3: Your basis for the gross distribution in Box 1 must equal Box 1 minus Box 2.
4: Check Box 4 for trustee-to-trustee transfers, including rollovers from QTP to ABLE accounts. Between Dec. 22, 2017, and Jan. 1, 2026, the Tax Cuts and Jobs Act allows such rollovers without penalty or income tax. The rollover must occur within 60 days after distribution.
5. Checking this box indicates the type of account.
6. indicates if the receiver is the specified beneficiary.
Fillers can insert a distribution code below boxes 5 and 6.
The 1099-Q has three copies. The distributor keeps Copy C, provides Copy B, and files Copy A with the IRS. Form 1099-Q should arrive via mail.
Those getting a 1099-Q don’t need to declare non-taxable distributions on their tax return, but they should save the form. To file taxes on distributions, enter the amount in Line 8z of Schedule 1 and attach it to Form 1040. Keep your 1099-Q copy for your tax records.
The IRS has made the 1099-Q online form fillable since it receives little
Access Form 1099-Q on the IRS website.
Form 1099-Q should arrive from your distributor if you received qualifying education program money. If you haven’t received a 1099-Q, contact your distributor.
Is 1099-Q required on my tax return?
To determine if Coverdell ESA or 529 plan payouts are taxed, Form 1099-Q is used. If the form says so, your tax return does not need to show that you owe no taxes.
Parent or student: 1099-Q filer?
The parent or student who received education plan payouts must complete Form 1099-Q. The student must fill out the form if the money travels straight from the education plan to the school.
Are 529 withdrawals income?
Five hundred twenty-nine withdrawals on donated funds are not taxable because they were previously taxed. Earnings are tax-free as long as leaves don’t exceed the beneficiary’s adjusted eligible school costs for the year.
Final Thought
Form 1099-Q guarantees you pay taxes on Coverdell ESA and 529 plan payouts. If the form shows tax liability, put it on your state and federal filings. Hire a tax adviser if needed.
Conclusion
- A 1099-Q is given to Coverdell and 529 plan distribution recipients.
- The form shows the account’s gross distributions for the year.
- Officers or employees who control a state or qualified educational institution program or who have distributed from a 529 plan should submit and send taxpayers a 1099-Q form.
- If distributions are taxable, taxpayers who get a 1099-Q should provide form information in their tax return.
