529 Withdrawal

[kjharris-maxwell]

We withdrew money from our daughter's NY State 529 Plan for qualified educational expenses including tuition, room, food expenses, and books.  We verified with the NY State 529 Plan that all of these withdrawals qualified as educational expenses.  However, our federal taxes only took into account the qualified expenses that were reported on the 1098-T which were less that what we withdrew so we were taxed on those qualified withdrawals that were not reported on the 1098-T.  What can we do?  We've already filed and we didn't catch this until after we had filed.

Thank you.

[Carl]

Generally, the 1098-T box 1 shows the amount of qualified education expenses paid to the school from all sources (out of your pocket, scholarships, grants, etc.)

Box 5 shows monies received by the school from "third party sources" (not you or the student) which is scholarships and grants. Box 5 will not include 529 distributions "UNLESS" the distribution was paid "directly" to the school, and the beneficiary recipient shown on the 1099-Q never touched the money. This "can" be a problem. Does box 5 of the 1099-Q include 529 distributions? If it does not, then that's not the issue and I'll move on to the next possibility.

[kjharris-maxwell]

Box 5 on the 1098-T has money for a scholarship paid directly to the school, not from the 529 account.  Box 5 on the 1099-Q is checked for Qualified tuition program State.  Not  sure if this answers your question?

[NCperson]

can you please post some specific numbers?

1098T = Box 1 and Box 5

1099Q  Box 1 and Box 2 

was your income above or below $160,000? 

how much were you other non-qualiifed expenses (room and board, books not in Box 1, computer purchases, etc). 

what is it on your tax form that unnerves you - what line and what amount? 

[Viggy]

I'm having the same problem.  Although I haven't submitted my taxes yet.  The 1098T only includes tuition cost, not housing, meal plan or textbooks.  Anyone have an answer?

[NCperson]

@Viggy - the 1098T (Box 1) only reflects tuition costs and and related expenses (such as required books, required fees, etc.).   Room and Board and books not required school are consciously not included.

What are you trying to accomplish? get the AOTC credit or something more? 

are you the student or the parent of a dependent student? 

[Viggy]

I'm the parent and my goal is not to pay taxes on the 529 plan distribution for room and board.

[NCperson]

please post the following and I will explain the math

1098T = Box 1 and Box 5

1099Q = Box 1 and Box 2 (whose social security number is on the document ?)

other expenses that are not in Box 1:

- Room and Board 

- Books purchased not required for class (and any books not otherwise part of 1098T / Box 1)

- computer and computer supplies

- anything else 

also, are you eligible for AOTC tax credit (your income below $160,000)

[Viggy]

1099Q Box 1 $22,050   Box 2 7575.84 (parent SSN)

1098T Box 1 12,152.50 Box 5  nothing

1098T box 1 232.25  box 5 0

Required books not purchased through the school  $1,230

Room and board  $8,435

We don't qualify of the tax credit.

[NCperson]

without the AOTC, it's pretty easy: 

your expenses are: 

12153+232+1230+8435 or  $22,050

your 1099Q distribution was also $22,050

since your expenses meet or exceed the distribution, NOTHING in BOX 2 is taxable.

there is no requirement to input all that onto your tax return, rather you just have to determine that nothing is taxable, which you have done.   Just document in your records the expenses that you laid out here and that they meet the distribution.  If the IRS ever comes calling you have it available, but there is no requirement to key the 1099Q onto you tax return.