It’s issued to people who received distributions from one of these education programs during the year, or in some cases, to account owners.
Example of Form 1099-Q
Let’s say that a parent set up a 529 plan for their child years ago. In 2022, 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.
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. 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. 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 Keep in mind that any basis amount reported in Box 2 can typically be withdrawn tax-free at any time.
What To Do If You Don’t Receive Form 1099-Q
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.
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
