IMPORTANT TAX RETURN DOCUMENT ENCLOSED DO NOT

P.O. BOX 30198

•

LANSING, MICHIGAN 48909

www.setwithmet.com

•

517-335-4767 or 800-MET-4-KID

RICK SNYDER

GOVERNOR

TATE OF

ICHIGAN

DEPARTMENT OF TREASURY

ANSING

NICK A. KHOURI

STATE TREASURER

January 2018

IMPORTANT TAX RETURN DOCUMENT ENCLOSED

DO NOT DISCARD

Dear MET Participant:

Enclosed is a Form 1099-Q, Payments from Qualified Education Programs (under Sections 529

and 530 of the Internal Revenue Code) showing the total amount of educational benefits and/or

refunds paid by Michigan Education Trust (MET) to colleges, universities or refund designees

during the 2017 tax year. The Internal Revenue Service (IRS) requires all Qualified Tuition

Plans (also called Section 529 Plans) such as MET to issue a Form 1099-Q to participants who

received MET benefits or a refund during the 2017 tax year.

The enclosed Form 1099-Q, is also being furnished to the IRS. If any portion of MET benefits

or refunds you received in 2017 are earnings (the increase in value earned on the prepaid tuition

amount), you may need to report this information on your tax return. MET is required to report

that amount to the IRS in accordance with the IRS instructions to filers, even though it may be

tax exempt. See “Box 2 – Earnings” on the enclosed Federal Form 1099-Q. If you did not have

MET earnings during 2017 the amount in Box 2 will be zero (0).

Tax-Exempt Earnings on MET Distributions

Beginning January 1, 2002, earnings on MET distributions used for a beneficiary’s qualified

higher education expenses may be exempt from federal and state income taxes. To determine

whether all or a portion of the MET distributions are taxable, see IRS Publication 970

(www.irs.gov). We recommend that MET participants consult with a professional tax preparer

or advisor as to specific applications of these provisions to your situation. For purposes of this

exemption, the IRS defines qualified higher education expenses as tuition, fees, books, supplies

and equipment required for enrollment at an eligible higher education institution. Room and

board are also considered to be qualified higher education expenses if the beneficiary was

enrolled at least part-time. It is your responsibility to keep receipts to substantiate any qualified

higher education expenses.

Taxable Earnings on MET Distributions

Earnings on MET distributions not used to pay for qualified higher education expenses are

subject to state and federal income taxes. If you receive a taxable distribution, you also must pay

a 10% additional tax on the amount included in income. Report taxable earnings as follows:

187 (Rev. 04-15)

Page 2

• Federal Form 1040. Report the taxable earnings amount as "other income" on line 21.

Include an explanation identifying the amount listed on line 21 as "MET unearned income."

Do not file Form 1040A or Form 1040EZ, as these forms do not provide a line to include

MET earnings. You may wish to consult a tax advisor. See IRS Publication 970 or call the

IRS at 1-800-829-1040 for further information.

• Federal Form 1040. Report the 10% additional tax on line 59.

• MET earnings are not subject to federal self-employment tax; therefore, you do not need to

file a Schedule SE.

• Michigan Form MI-1040. The Michigan income tax form requires you to first list your

Adjusted Gross Income (AGI) from your Federal Form 1040 to determine taxable income.

Therefore, any taxable MET earnings will be included in the AGI computation, and you

should not add MET earnings again when completing your state income tax forms.

If you are a purchaser of a MET contract and you received a taxable refund from MET, you

may deduct the MET earnings portion of the refund (to the extent included in AGI) from

your Michigan taxable income on line 13 of Form MI-1040.

Do not attach the enclosed statement to your Michigan tax return when filing. For further

information regarding the Michigan income tax form, you may call the Michigan Department

of Treasury at (517) 636-4486 or visit www.michigan.gov/taxes.

To view benefit payment details, visit the MET website at www.SETwithMET.com, in the right

column under Login click on “Access your contract information.” If you are a new user or if you

have not logged in since October 2011, you must register and establish a new user ID and

password. Once logged in, click on the contract number, and then click on the “Benefits

Information” tab.

Please review the information on the enclosed Form 1099-Q, compare it with your records, and

contact the MET office if there are any discrepancies no later than February 16, 2018. If you

identify any errors or have any questions regarding the enclosed form, call the MET office at

(800) 638-4543 or (517) 335-4767 in the greater Lansing area.

Sincerely,

Robin R. Lott

Executive Director

Michigan Education Trust

Enclosure