Why did I get a Form 1099-Q and what should I do with it?

Female college student with laptop looking at her tax form 1099qImage: Female college student with laptop looking at her tax form 1099q

In a Nutshell

You might get a Form 1099-Q if you used funds from a 529 plan or Coverdell ESA to pay for education expenses. You’ll need the form — and knowledge of IRS rules for reporting education account distributions — when you file your federal income tax return.
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This article was fact-checked by our editors and reviewed by Jennifer Samuel, senior product specialist for Credit Karma. It has been updated for the 2019 tax year.

Around tax time, you might receive a number of 1099 tax forms, including Form 1099-Q if you used money from a qualified tuition program or Coverdell ESA to pay for college tuition or other education costs.

Form 1099-Q reports total withdrawals from qualified tuition programs (QTPs) like 529 plans or Coverdell educational savings accounts. Knowing what to do with this form can help you avoid paying taxes and penalties on withdrawals that could be tax-free.


What is Form 1099-Q?

Both the 529 college savings account and Coverdell education savings account, or CESA, are tax-advantaged investment accounts that can help your family save for education expenses. The accounts allow your earnings to grow tax-free as long as you use withdrawals only for qualified education spending and follow other IRS requirements for the accounts.

If you withdraw funds from one of these accounts during the tax year, the account administrator is required to issue Form 1099-Q to you and the IRS. This short form provides the following information:

  • Payer’s name, address and taxpayer identification number (or TIN)
  • Recipient’s name, address and TIN
  • Account number
  • Box 1. Gross distribution from the account
  • Box 2. Portion of the distribution allocated to earnings in the account (rules are different for CESAs)
  • Box 3. Portion of the distribution allocated to basis (original contributions to the account)
  • Box 4. A check box titled “trustee-to-trustee transfer” indicating whether the distribution was a rollover to another account
  • Box 5. Check boxes indicating whether the account is a qualified tuition program established by a private educational institution, a QTP established by a state or a Coverdell ESA
  • Box 6. A check box indicating whether the recipient is the designated beneficiary of the account

The administrator may also enter a distribution code in the blank box below boxes 5 and 6, although they’re not required to do so. The distribution codes, which are provided by the IRS, are designed to help taxpayers determine whether their distribution is taxable income.

If you received distributions from more than one administrator or more than one account with the same administrator, you might receive multiple 1099-Qs. 

What should I do with Form 1099-Q?

If you used all the money you withdrew from your QTP or Coverdell ESA to pay for qualified education expenses, and meet other IRS requirements, the distributions aren’t taxable and you don’t need to report them as income. Just file your 1099-Q with your tax records.

FAST FACTS

What counts as qualified education expenses?

Definitions and caps vary for both 529 plans and Coverdell ESAs, but typically qualified education expenses for higher education include tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible educational institution. If the student is enrolled at least half time, funds can also be used to cover room and board. But room-and-board expenses are limited to the amount the school charges for on-campus housing, even if the student chooses to live off campus.

Learn more about qualified education expenses.

But if your distributions exceeded your qualified education expenses, you used the money for nonqualified expenses, or you had another distribution, deduction or credit for the same expenses, some of the earnings reported in Box 2 may be taxable. Instructions for calculating the taxable portion of your distribution are included in IRS Publication 970, and the result is added to the total on Line 21 of Schedule 1 attached to your Form 1040.

You may also need to calculate a 10% additional tax on any amount included in your income. You figure and report the penalty using Part II of Form 5329, and the result carries to Line 59 on Schedule 4 attached to your Form 1040.

In certain circumstances, you may qualify for an exception to the penalty if the designated beneficiary of the account …

  • Dies or becomes disabled
  • Receives a tax-free scholarship or grant
  • Attends a U.S. military academy
  • Receives veteran’s educational assistance
  • Receives employer-provided educational assistance
  • Receives any other tax-free payments, excluding gifts or inheritance, for educational assistance

You may also qualify for an exclusion if the amount was included in income because you used the expenses to calculate the American opportunity or lifetime learning credit. There are additional requirements for coordinating with these credits.


Bottom line

If you receive Form 1099-Q, don’t panic. As long as the distribution was spent on qualified education expenses and meets all other qualifications, you can simply save the form with your other tax documents and records of how the funds were used.

If you do need to include all or part of the distribution on your tax return, follow the instructions for calculating the taxable portion in Publication 970. And try to avoid taking unqualified withdrawals next year so that you can avoid losing your savings to taxes and penalties.


Jennifer Samuel, senior tax product specialist for Credit Karma, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor’s degree in accounting from Saint Leo University. You can find her on LinkedIn.


About the author: Janet Berry-Johnson is a freelance writer with a background in accounting and insurance. She has a bachelor’s degree in accounting from Morrison University. Her writing has appeared in Capitalist Review, Chase News &a… Read more.