Question

I received a 1099-Q in my name, but I used the funds to pay the tuition of my college-aged child. Are funds reported on Form 1099-Q considered taxable income?

Answer

The full amount of earnings as reported on Form 1099-Q is taxable if:

  • You’re the designated beneficiary.
  • You didn’t use the funds for your own qualified education expenses.

An early withdrawal penalty of 10% applies. The penalty is reported on Form 5329.

Before taking the withdrawal, you could change the beneficiary on the account to a member of the beneficiary’s family. Then, you can use it for their education expenses without tax or penalty.

To learn more, see Publication 970 at www.irs.gov.

 

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