Internal Revenue Service Form 1099-Q should be delivered to
you if you received education benefits during a tax year--either from a
Coverdell education savings account or another qualified tuition program. (You
may also receive a 1099-Q if you are the beneficiary of an estate.) The form
will record exactly how much you received in benefits. Have a question? Get an
answer from tax advisor now!
Instructions
1 - Calculate how much money you spent on education in the
year under review. This includes tuition, textbooks, room and board and related
fees.
2 - Compare the amount from Step 1 to the distribution you
received, which will be recorded in Box 1 of your 1099-Q. A portion of that
amount is recorded in Box 2 as "earnings" from your distribution.
Depending on how much you spent on education, some or all of those earnings may
be taxable.
3 - Record a portion of your Box 2 earnings as "Other
Income" on line 21 of your tax return. The percentage of these earnings
that must be reported and taxed is equal to the percentage of your Box 1
distribution that you DIDN'T use for education expenses. For example: if Box 1
shows a distribution of $10,000, Box 2 earnings of $2,000, and your education
expenses were $5,000, then 50 percent of your distribution went unused. You
must therefore report 50 percent of your Box 2 earnings--$1,000--on line 21.
If, however, your expenses were $8,000, then only 20 percent of your
distribution went unused, and you should report $400. Finally, if your
education expenses were zero, you must report the full amount in Box 2.
California Business Tax Extension
California Business Tax Extension
4 - Keep the 1099-Q for your records.
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