529 Account distributions and completing tax forms

MomCat2
Mon, 14 Mar 2011 21:52:10 +0000

People:
Please don’t post what you “would imagine” to be true, but only what you KNOW to be true, with a link if possible.
The portion of scholarships/grants is considered EARNED income:
“Earned income. This is salaries, wages, professional fees, and other amounts received as pay for work you actually perform. Earned income (only for purposes of filing requirements and the standard deduction) also includes any part of a scholarship that you must include in your gross income. See chapter 1 of Publication 970, Tax Benefits for Education, for more information on taxable and nontaxable scholarships.” (from the same publication linked in the previous post) [Publication 501 (2010), Exemptions, Standard Deduction, and Filing Information](Publication 501 (2022), Dependents, Standard Deduction, and Filing Information | Internal Revenue Service)

And just as an FYI (from the same Publication) “unearned income includes taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust.”

SO - If lindz’s daughter does not meet any of the criteria listed in post #15 in terms of the limits for unearned income, earned income, and gross income, or self-employment income, then she will not have to file.
BUT - if she had any federal income tax withheld from her checks, she may want to file to get that money back (likewise a state return if state tax was withheld and she had no state tax liability).