What Is Form 1099-Q: Payments From Qualified Education Programs?
Form 1099-Q: Payments From Qualified Education Programs is an Internal Revenue Service (IRS) tax form sent to individuals who receive distributions from a Coverdell education savings account (ESA or CESA) or a 529 plan. These distributions—including rollovers—may be taxable, and you must determine the tax liability of any distribution using other IRS information. The form is then used by taxpayers to fill out both federal and state tax returns if the distributions received are subject to tax.
Key Takeaways
- Individuals who receive distributions from a Coverdell education savings account or 529 plan are sent a 1099-Q.
- The form identifies the amount made from the account in gross distributions over the year being reported.
- A 1099-Q form should be filed and sent to taxpayers by officers or employees who have control of a program established by a state or qualified educational institution or anyone who has made a distribution from a 529 plan.
- Individual taxpayers who receive a 1099-Q only need to include information from the form in their tax return if the distributions are taxable.
Who Can File Form 1099-Q?
Form 1099-Q should be filed by officers or employees who have control of a program established by a state or qualified educational institution. It can also be filed by anyone who has made a distribution from a 529 plan, also known as a qualified tuition program (QTP).
CESAs and QTPs are tax-advantaged investment accounts designed to pay for qualified higher education expenses. A 1099-Q formwill identify the amount made from the account in gross distributions over the year being reported. These gross distributions are then compared to the educational expenses incurred over the year.
If the gross distributions exceed qualified education expenses, then the excess is taxable and must be reported on the taxpayer's tax return. If the expenses are greater than the distributions, the individual may use the subsequent excess toward aneducationtax credit.
Form 1099-Q will be issued to the beneficiary student, for example, if the 529 distribution was paid to the beneficiary, the school, or a student loan provider. Any taxable amount of the distribution will be reported on the beneficiary’s income tax return. Distributions used to pay for nonqualified expenses are subject to income tax and a 10% penalty on the earnings portion of the withdrawal.
There’s often confusion about who uses the 1099-Q for their tax return: the beneficiary student or the owner of the account (who may be a parent or other relative). The person who receives the funds and whose Social Security number is on the form has to report the 1099-Q ontheir tax return.
It’s likely that the student/beneficiary will pay little or no tax on the distributions; the same cannot be said if the beneficiary is someone other than the student using the educational savings. Younger students also often fall below the reporting threshold for a federal income tax return.
How to File Form 1099-Q
Form 1099-Q must include the payer/trustee’s name, address, telephone number, and tax identification number (TIN), along with the recipient's name, address, account number, and TIN, which for individuals is typically their Social Security Number.
The form includes six numbered boxes.
Box 1. This will have the gross distribution over the past year from a QTP or a CESA, whether cash or in-kind, including tuition credits or certificates, vouchers, waivers, or any similar items. Under a QTP, the amount is included in income if there has been more than one transfer or rollover within any 12-month period with respect to the same beneficiary, or a change in the designated beneficiary has been made and the new designated beneficiary is not a family member. Under a CESA, the amount is included in income if there has been a change in the designated beneficiary and the new designated beneficiary is not a family member or is over age 30 (except for beneficiaries with special needs).
Box 2. Look here for the total amount of earnings.
Box 3. This shows your basis in the gross distribution listed in box 1; it must equal box 1 minus box 2.
Box 4. This must be checked off if this is a trustee-to-trustee transfer, and this can include rollovers from a QTP to an achieving a better life experience (ABLE) account. Such rollovers are allowed under the Tax Cuts and Jobs Act between Dec. 22, 2017, and Jan. 1, 2026, without incurring any penalty or income tax. However, the rollover must occur within 60 days of the distribution.
Box 5. Here a box is checked indicating the type of account.
Box 6. This notes whether or not the recipient is the designated beneficiary.
Filers who fill out the form can also enter a distribution code in the blank spaces below boxes 5 and 6 if they choose.
There are three copies of the 1099-Q. The distributor files Copy A with the IRS, sends you Copy B, and retains Copy C. You should receive Form 1099-Q in the mail.
If distributions aren't taxable, taxpayers receiving a 1099-Q don't need to report them in their tax return but should keep the form with their tax records. If distributions are subject to taxes, then the amount is added to Line 8z of Schedule 1 and attached to Form 1040, your federal tax return, while also retaining your 1099-Q copy with your tax records.
Because the IRS receives very few 1099-Qs, the form has been converted to an online fillable format.
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Form 1099-Q is available on the IRS website.
If you received qualified education program funds, your distributor should send you a copy of Form 1099-Q. If you haven't received a 1099-Q and believe you should have, contact your distributor.
Do I Have to Report 1099-Q on My Tax Return?
Form 1099-Q is filled out to determine if you owe any taxes on distributions from a Coverdell education savings account (ESA) or a 529 plan. If the form indicates that you do not owe any taxes, then you do not need to report this on your tax return.
Who Files a 1099-Q, the Parent or the Student?
The recipient of the distributions from an education plan will have to file Form 1099-Q, which can be either the parent or the student, depending on who received the money. For example, if the money goes directly from the education plan to the school, then the student is the recipient and will need to fill out the form.
Do 529 Withdrawals Count As Income?
529 withdrawals on the contributed amount do not count as income that needs to be taxed as the amount was already taxed. Earnings do not need to be taxed either as long as withdrawals don't exceed the beneficiary's adjusted qualified education expenses for the year.
The Bottom Line
Form 1099-Q ensures you're paying your appropriate taxes on distributions from a Coverdell education savings account (ESA) or a 529 plan. If the form indicates you owe taxes, this will need to be included on your state and federal tax returns. If you need assistance, seek out the help of a professional tax advisor.
