What Is Form 1099-Q?

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DEFINITION
Form 1099-Q is the IRS tax form used to report distributions from qualified education programs, including 529 plans and Coverdell Education Savings Accounts (ESAs).

Form 1099-Q is the IRS tax form used to report distributions from qualified education programs, including 529 plans and Coverdell Education Savings Accounts (ESAs). It’s issued to people who received distributions from one of these education programs during the year, or in some cases, to account owners. 

Here’s what you need to know about Form 1099-Q and when you’ll receive it.

Definition and Example of Form 1099-Q

1099-Q is the tax form on which distributions from 529 plans and Coverdell ESAs are reported. If you’ve received a distribution from one of these programs, you should also receive Form 1099-Q. 

For example, let’s say that a parent set up a 529 plan for their child years ago. In 2021, the child attended college and the 529 plan made a distribution that the child used to pay for their tuition. In this case, the 529 plan administrator would issue a Form 1099-Q to the child.

Form 1099-Q

Who Uses Form 1099-Q?

Form 1099-Q is used by qualified education programs, individuals, and the IRS.

Qualified education programs are responsible for filing Form 1099-Q with the IRS and sending a copy to the recipient of the distribution. If the distribution was not made to the beneficiary or directly to an educational institution (such as a college or university) for the benefit of the beneficiary, Form 1099-Q should instead be issued to the account owner.

Individuals use Form 1099-Q to review the distribution amounts they received from qualified education programs during the previous tax year.

While distributions from 529 plans and Coverdell ESAs are generally not taxable if used for qualified educational expenses, they may be taxable if used for non-qualified expenses.

Form 1099-Q recipients should ensure they have used their distributed amounts for qualified purposes. Otherwise, any distribution amount reported on Form 1099-Q in excess of the amount used for qualified purposes may be taxable.

The IRS uses Form 1099-Q to know the amount of distributions made from 529 plans and Coverdell ESAs. For example, if a taxpayer is audited, the IRS may compare the amount of qualified educational expenses the taxpayer claims to have paid with the distribution amount reported on Form 1099-Q.

Where To Get a Form 1099-Q

If you received a distribution from a 529 plan or a Coverdell ESA during the previous tax year, you should expect to receive a Form 1099-Q from your plan administrator or trustee by Jan. 31 of the following year. If you were expecting a Form 1099-Q and you don’t receive it by Jan. 31, contact your 529 plan administrator or Coverdell ESA trustee to ask about the status.

You may receive your Form 1099-Q either electronically or by mail.

When you receive Form 1099-Q, the first thing you should do is compare the gross distribution amount reported in Box 1 to the amount of qualified educational expenses paid by the beneficiary (or paid on their behalf) during the year.

If the amount in Box 1 exceeds the amount of qualified educational expenses paid during the year, you will need to use the amounts in Box 2 and Box 3 to determine the taxable amount of your distribution. Keep in mind that any basis amount reported in Box 2 can typically be withdrawn tax-free at any time.

Benefits of Form 1099-Q

Form 1099-Q, like many informational tax forms, helps taxpayers prepare their taxes.

However, taxpayers should compare the amounts reported on Form 1099-Q with their own records and communicate any discrepancy to the qualified education program that filed the Form 1099-Q.

Form 1099-Q also helps the IRS catch tax cheats who abuse the tax advantages of qualified education programs by using their distributions for non-qualified purposes but not reporting non-qualified amounts in excess of their basis as taxable income

Key Takeaways

  • Form 1099-Q is used to report distributions from 529 plans and Coverdell ESAs.
  • The form is filed with the IRS by the 529 plan and Coverdell ESAs administrators, with a copy sent to the beneficiary or, in some instances, the account owner.
  • The IRS uses the Form 1099-Q to ensure that taxpayers are in compliance with 529 plan and Coverdell ESA rules.

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