Form 1099-Q Checklist: 2013 Tax Year
Purpose and Scope
Form 1099-Q reports distributions from qualified tuition programs under Section 529 and Coverdell ESAs under Section 530 during the 2013 tax year. Officers and employees having control of programs established by states or eligible educational institutions must file this form, and trustees must distinguish trustee-to-trustee transfers from taxable distributions while applying non-family beneficiary change rules.
Gross Distribution Reporting
Report the gross distribution amount in Box 1 as the sum of earnings and the basis for all qualified education program distributions. Gross distributions from qualified tuition programs include amounts for tuition credits or certificates, payment vouchers, tuition waivers, or similar items, whether distributed in cash or in-kind.
For 2013, verify that any rollover or transfer within 60 days between accounts receives correct identification in Box 4, as multiple transfers within 12 months for the same beneficiary trigger income inclusion for QTP distributions. Gross distributions from Coverdell ESAs include amounts for refunds, payments upon death or disability, or withdrawal of excess contributions plus earnings.
Earnings Calculation and Reporting
Enter the earnings portion in Box 2 using the earnings ratio described in applicable regulations and guidance for qualified tuition programs. For Coverdell ESAs in 2013, if the designated beneficiary changed and the new beneficiary is not a family member or is over age 30, except special needs beneficiaries, the entire earnings amount becomes taxable, and the recipient must report it on Form 1040 as other income.
Basis Reporting Requirements
Complete Box 3 with basis information when you can determine the amount for both QTPs and Coverdell ESAs, ensuring Box 3 equals Box 1 minus Box 2. For Coverdell ESAs, if you do not report earnings and basis in Boxes 2 and 3, leave these boxes blank and report the fair market value as of the end of the year in the blank box below Boxes 5 and 6 with the label "FMV."
Trustee-to-Trustee Transfer Identification
Check Box 4 only if a direct trustee-to-trustee transfer occurred between QTPs or between Coverdell ESAs, or from a Coverdell ESA to a QTP during 2013. For 2013, transfers between different beneficiary families do not qualify for Box 4 treatment and must be reported as taxable distributions to the recipient.
In a trustee-to-trustee transfer between qualified education programs, the distributing program must provide you with a statement reporting the earnings portion of the distribution within 30 days of the distribution or by January 10th, whichever is earlier. You must properly account for this information when computing the earnings or loss reported in Box 2 and the basis reported in Box 3.
Program Type Selection
Select the appropriate program type in Box 5 by checking either the Private box for QTPs established by private eligible educational institutions, the State box for QTPs established by states, or the Coverdell ESA box. In 2013 guidance, state 529 plans and private 529 plans require separate reporting identification, so you must confirm the account custodian's plan registration status before completing this box.
Designated Beneficiary Status
Check Box 6 only if the distribution recipient is not the designated beneficiary named in the account document under Section 529(e)(1). For 2013, this flag triggers special non-family beneficiary change rules requiring review of whether the 10% penalty under Section 530(d)(4) or Section 529(e) applies to the distribution.
Identification Numbers and Account Information
Complete the following payer identification:
- Payer name and federal employer identification number
- For state QTPs using the state's EIN, enter the state name on the first line and program name on the second line.e
- For Coverdell ESAs, enter the trustee name and EIN
Complete the following recipient identification:
- Recipient name and social security number
- For QTPs, list the designated beneficiary as the recipient only if the distribution is made directly to the beneficiary or to an eligible educational institution for the beneficiary's benefit.
- For Coverdell ESAs, enter the designated beneficiary name and SSN as the recipient.
Attach an account number or unique identifier assigned by the payer in the designated field to help recipients match distributions to their account statements.
Distribution Code Usage
For 2013, you may, but are not required to include one of the following distribution codes in the blank box below Boxes 5 and 6:
- Code 1: Distributions including transfers to the recipient and direct payments to qualified educational facilities
- Code 2: Excess contributions plus earnings taxable in 2013 for withdrawals of excess Coverdell ESA contributions
- Code 3: Excess contributions plus earnings taxable in 2012 for withdrawals when earnings are taxable in the year excess contributions were made
- Code 4: Disability distributions made after the recipient was disabled
- Code 5: Death payments to a decedent's beneficiary, including an estate
- Code 6: Prohibited transactions under applicable code sections
Special Reporting Considerations
Verify that Box 2 amounts reflect only true earnings and not return of contributions to ensure accurate tax reporting. If a Coverdell ESA final distribution occurs and the basis exceeds distributions, recipients may claim a deductible loss on Form 1040, so payers must ensure earnings calculations do not obscure this opportunity.
Filing and Furnishing Deadlines
Prepare Copy B for recipient delivery by January 31, 2014, for tax year 2013 returns, and file Copy A with the IRS by February 28, 2014. Copy B must include the notice that failure to report taxable distributions may result in negligence penalties or other sanctions, and payers must include the complete Privacy Act notice from the 2013 General Instructions.
Family Member Definition
Family members of the designated beneficiary include the beneficiary's spouse, children, stepchildren, foster children and their descendants, siblings and their children, parents and their siblings and ancestors, stepparents, in-laws, the spouse of any foregoing individuals, and any first cousin. For Coverdell ESAs, the new beneficiary must be a member of the designated beneficiary's family and be under age 30, except for beneficiaries with special needs.
Amounts remaining in Coverdell ESA accounts must be distributed within 30 days after the designated beneficiary reaches age 30 unless the beneficiary qualifies under special needs provisions. Age 30 distribution requirements apply to ensure proper account termination and tax treatment for standard beneficiaries.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
