Specific Instructions for Form 1099-Q
File Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530), if you made a distribution from a qualified
tuition program defined under section 529 or a Coverdell education savings account (ESA) defined under section 530.
Note:
Do not file Form 1099-Q for a change in the name of the designated beneficiary on a qualified tuition program account if the new
beneficiary is a member of the former beneficiary's family. Also, for a Coverdell ESA, the new beneficiary must be a member
of the designated
beneficiary's family and be under age 30 (except beneficiaries with special needs).
Qualified Education Programs
Qualified Tuition Program
A qualified tuition program is a program described in section 529 that is established and maintained by a private eligible
educational institution
or a state (or its agency or instrumentality).
Under a qualified tuition program a person:
- May purchase tuition credits or certificates on behalf of a designated beneficiary that entitle the beneficiary to the waiver
or payment of
qualified higher education expenses or
- In the case of a program established and maintained by a state, may make contributions to an account established to meet the
higher
education expenses of the designated beneficiary.
Other rules apply. See Proposed Regulations section 1.529-2 and Notice 2001-81, 2001-2 C.B. 617.
Coverdell Education Savings Account (ESA)
Coverdell ESAs are described under section 530. Report any contributions or rollovers for these accounts on Form 5498-ESA, Coverdell ESA
Contribution Information. See the Instructions for Form 5498-ESA for more information.
A family member of the designated beneficiary includes their spouse, children and their descendants, stepchildren and their
descendants, siblings
and their children, parents and grandparents, stepparents, and their spouses. It also includes the first cousins of the designated
beneficiary.
If you are required to file Form 1099-Q, you must provide a statement to the recipient. Furnish a copy of Form 1099-Q or an
acceptable substitute
statement to each recipient. Also, see part H in the 2004 General Instructions for Forms 1099, 1098, 5498, and W-2G.
Program's Name and Employer Identification Number (EIN)
In the payer's/trustee's name and Federal identification number areas of the form, enter the name and EIN of the qualified
tuition program or that
of the trustee for a
Coverdell ESA.
If the qualified tuition program is a program established and maintained by a state using the EIN of the state, enter the
name of the state on the
first name line and the name of the program on the second name line.
Recipient's Name and Social Security Number (SSN)
For a qualified tuition program, list the designated beneficiary as recipient only if the distribution is made (a) directly
to the designated beneficiary or (b) to an eligible educational institution for the benefit of the designated beneficiary. Otherwise, list
the account owner as the recipient of the distribution. Enter the SSN for the applicable recipient.
For a Coverdell ESA, enter the name and SSN of the designated beneficiary as the recipient.
Box 1. Gross Distribution
Gross distributions from a qualified tuition program, whether in cash or in kind, include tuition credits or certificates, payment
vouchers, tuition waivers, or other similar items. Gross distributions also include a refund to the account owner or the designated
beneficiary, or to
the beneficiary upon death or disability. For more information on reporting distributions, see Proposed Regulations
section 1.529-4.
Gross distributions from a Coverdell ESA include a refund, a payment upon death or disability, or a withdrawal of excess contributions
plus earnings.
If earnings and basis are not reported for Coverdell ESA distributions, leave boxes 2 and 3 blank. Do not enter zero. Instead,
you must report the
fair market value (FMV) as of the end of the year in the blank box below boxes 5 and 6. Label the amount “FMV.” See Notice 2003-53, 2003-33
I.R.B. 362, for more reporting requirements.
Use the earnings ratio described in Proposed Regulations section 1.529-3 and Notice 2001-81 to determine the earnings (or
loss) on the gross
distribution reported in box 1. Enter the earnings in box 2. If there is a loss and this is not the final year for distributions
from the account or
there are no earnings, enter zero in box 2. Enter a loss in box 2 only if this is the final year for distributions from the
account. Any earnings are
not subject to backup withholding.
If you are reporting a distribution from a Coverdell ESA that includes a returned contribution plus earnings, you should file
two Forms
1099-Q—one to report the returned contribution plus earnings, the other to report the distribution of the other part of the
account.
You should file a separate Form 1099-Q for any trustee-to-trustee transfer.
For Coverdell ESAs, if you are not reporting earnings, see the Caution above.
For Coverdell ESAs, if you are reporting earnings on a distribution of excess contributions, use the method for calculating
the net income
attributable to IRA contributions that are distributed as a returned contribution under Notice 2000-39, 2000-30 I.R.B. 132,
and Proposed Regulations
section 1.408-11.
Use the blank box below boxes 5 and 6 to indicate that the amount in box 2 includes earnings on excess contributions. To meet
this requirement,
enter distribution code 2 or 3 (as applicable) in the blank box. See Notice 2003-53 for more information.
Enter the basis in the gross distribution reported in box 1. The amount in box 3 must equal box 1 minus box 2.
For Coverdell ESAs, if you are not reporting basis, see the Caution above.
For determining basis of a Coverdell ESA, you may rely on Notice 2001-81.
Box 4. Trustee-to-Trustee Transfer Checkbox
Check this box if the distribution was made directly (trustee-to-trustee transfer) from one qualified tuition program to another.
For a Coverdell
ESA, check this box if the distribution was made directly to another Coverdell ESA or a qualified tuition program.
In a trustee-to-trustee transfer between qualified education programs, the distributing program must provide you 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 in computing the earnings or (loss) reported in box 2 and the basis reported in box 3.
If you do not have records of whether a gross distribution from a Coverdell ESA made in 2004 was a trustee-to-trustee transfer,
leave Box 4 blank.
Check the “Private” box to indicate the distribution is from a qualified tuition program established by one or more private eligible
educational institutions or check the “State” box to indicate the distribution is from a qualified tuition program established by a state.
Otherwise, check the “Coverdell ESA” box.
Box 6. Designated Beneficiary Checkbox
Check the box if the recipient is not the designated beneficiary under a qualified tuition program or a Coverdell ESA (see
section 529(e)(1)).
