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Form 1099-Q reports distributions from education savings accounts and 529 plans. If you're the recipient of these distributions, you'll need to report them on your tax return. However, the good news is that if you used all of the distributed funds for qualified education expenses, then the distribution is generally tax-free.

Here's how it works:

1. Box 1 on Form 1099-Q shows the total amount of your distribution.
2. Box 2 shows the portion of the distribution that comes from earnings on your account.
3. Box 3 shows the portion of the distribution that comes from your original contributions (which were made with after-tax dollars).

If you used all of the distribution for qualified education expenses, then you won't owe tax on the amount in Box 2. But if you didn't use all of the distribution for these expenses, then you'll need to calculate the taxable portion of your distribution. You can do this by subtracting your qualified education expenses from the total distribution amount (Box 1). The result is the amount you'll need to report as taxable income.

Remember, qualified education expenses include things like tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Room and board can also be considered a qualified expense for students who are enrolled at least half-time.