After looking at it more carefully, I realize that the non-qualified distribution on her 1099Q was the health insurance fees that were wrapped in with the bill from the university. So she does have legitimate nonqualified distributions, but it amounts to about $650 of 'income' and she has no other income for the year.
While this is unearned income and she has no other reportable income for the year, I need to know if she needs to file a return. IRS Publication 929 (2017), Tax Rules for Children and Dependents states the following:
Other Filing Requirements
Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return.
A dependent must file a tax return if he or she owes any other taxes, such as:
Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who didn’t withhold these taxes,
Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance,
Alternative minimum tax,
Additional tax on a health savings account from Form 8889, Part III,
Recapture taxes, such as the tax from recapture of an education credit, or
Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself.
It is the last paragraph that I was looking at.
Thanks again for any thoughts!
