Maryland 529 Distribution / 2017 Tax Statement

[Anonymous]

We received a 2017 Maryland 529 distribution statement this week, addressed to and in the name of our 20yo college sophomore. Although there are no tax consequences to the distribution, we are perplexed that it was sent in his name (vs. the trustee's name) and don't know how to handle it on tax returns.

Does he file it as part of his tax return? (If so, he'll need to do the long-form return, which would be a big drag for him.)

Or do we file it as part of our tax return?

Does anyone know?

Thanks.

[Anonymous]

When you make a distribution, you are asked to indicate whether it is to be sent to the 1) Account Holder (likely you/your spouse) 2) the beneficiary (the student/your child) or 3) the college. It sounds like you selected 2, and was issued under their SSN. He should file it under his own taxes.

[Anonymous]

Anonymous wrote:When you make a distribution, you are asked to indicate whether it is to be sent to the 1) Account Holder (likely you/your spouse) 2) the beneficiary (the student/your child) or 3) the college. It sounds like you selected 2, and was issued under their SSN. He should file it under his own taxes.

The distribution was sent directly to the college.

[Anonymous]

Federal Taxation of Benefit Payments. Distributions from your
Account may have two components: (1) principal, which is not
taxable when distributed, and (2) earnings, if any, which may
be subject to federal taxes. We determine the earnings portion
at calendar year-end based on IRS rules and report it to the
IRS and the taxable party on Form 1099-Q (or other successor
form). In certain cases, losses may be reported to the IRS. You
are responsible for preparing and filing the appropriate forms
when completing your federal income tax return and for
paying any applicable tax directly to the IRS. The taxable
party is the Beneficiary unless the distribution is issued to
the Account Holder

https://maryland529.com/Portals/0/Files/cspm_enrollment_kit.pdf

[Anonymous]

Anonymous wrote:

Anonymous wrote:When you make a distribution, you are asked to indicate whether it is to be sent to the 1) Account Holder (likely you/your spouse) 2) the beneficiary (the student/your child) or 3) the college. It sounds like you selected 2, and was issued under their SSN. He should file it under his own taxes.

The distribution was sent directly to the college.

Then it is for the beneficiary. Presumably your DC filed taxes for summer income so this will be claimed on his 1040 along with the deduction. It works out fine. Sometimes we’ve had the payments go to the college so DCs have gotten these statements.

[Anonymous]

Thanks all. I spoke with MD529 and the IRS this morning.

MD529 could not provide me with tax advice, but said that the 1099-Q is a validation that payment was made to qualified educational expenses per IRS rules (i.e. directly to the college).

The IRS said the same - it is a validation and need not be filed, but should be retained as proof that we used the money for qualified expenses.

https://www.taxslayerpro.com/kb/369/Form-1099-Q--Payments-from-Qualified-Education-Programs?language=1&category=401&page=1

" - If you used all of the funds distributed from your account for qualified education expenses, you do not need to report anything on your federal income tax return. As long as your distribution was spent entirely for education expenses, the IRS will generally not tax the earnings. However, it is advised that you keep your Form 1099-Q and copies of your qualified education expenses for your records."