529 & HSA withdrawal for 2022 Expenses done on 30th Dec 2002 but realized around 3rd Jan 2023

[snvasanth]

Hi there,

1) For my daughter's college expenses in 2022, I initiated the 529 Withdrawal on 30thDec2022. I have received 1098T. But I haven't received 1099Q since the actual transaction happened on 3Jan2023. She is done with her college and there are no expenses expected for 2023. Any suggestions to deal with this slipped date?

2) Similarly for all Medical expenses in 2022, I initiated the HSA withdrawal on 30thDec2022. But the actual transaction happened on 5Jan2023. When googled, I found that this is acceptable.

Thanks,

Vasanth

[MinhT1 · Accepted solution]

1) As you have no educational expenses in 2023 to justify the distribution from your 529 plan, you will have to pay tax (and a 10% penalty) on the earnings reported on the 2023 form 1099-Q. For 2022, you can use education expenses reported on her 1098-T to claim her education credits (AOTC or Lifetime learning credit).

2) For your HSA, the reimbursement for medical expenses incurred can take place in 2023. When you receive your 2023 form 1099-SA, you can say that the amount distributed was for medical expenses incurred.

[snvasanth]

Thank you for the response. 

What would i do for 2022 HSA Question? Did you use your Health Saving Account to pay for anything in 2022?

Answer: YES? Though no 1099-SA

[Hal_Al]

Re: the 529 distribution, See previous discussions:

https://ttlc.intuit.com/community/college-education/discussion/529-provider-distributed-funds-on-12-...

https://ttlc.intuit.com/community/college-education/discussion/i-took-a-529-distribution-in-2021-for...

https://www.savingforcollege.com/article/timing-of-529-plan-distributions-must-match-qualified-expen...  

[BillM223]

"Did you use your Health Saving Account to pay for anything in 2022?" - Wait until you get your 1099-SA before you answer Yes to this. If you answer Yes, TurboTax is going to expect you to have a 1099-SA to enter, so if the 1099-SA arrives in January 2023, enter it on your 2023 tax return.

Medical expenses are not tightly coupled to HSA withdrawals. That is, you can withdraw dollars from your HSA to reimburse yourself for qualified medical expenses at any point in the future - even years later - after the expense was incurred, so long as the expense was incurred after the HSA was created (generally, when the first contribution was made to the HSA).