CP2000 says 1099Q amount is "income", which affected other areas of tax return. Will sending my 1099Q and 1098T resolve all issues?

[kjgc1991]

Received a CP2000 because my 529 was calculated as income, despite my distribution being lower than my qualified education expenses. I only used my 529 account for tuition and books. The additional "income" the IRS thinks I owe affected other areas on the CP2000, including putting me over the income limit for a $200 retirement tax savings and stating I should have paid $1,588 in tax on a 5329 form. It also stated that I owe back the $2000 lifetime learning credit (I'm in grad school and can't get AOC), even though my education expenses less the $2000 credit are still more than my 529 distribution amount. If I send in my 1099q and my 1098-T, will the $200, $1,588, and $2000 issue be resolved as well?

[JaimeG]

You must contact the IRS over the phone and make arrangements to substantiate that the distribution from your Qualified Tuition Program was used entirely for Qualified Education Expenses.

Form 1098-T is simply what the school reported but if you look at the form, it is possible that only Box 2 has a dollar amount that is described as "Amount Billed", Box 1 states "Payments Received". If possible it would be best to gather:

• Tuition Statements/receipts of payment directly from the College or University
• All receipts for other Qualified Education Expenses (please view the list below)

Qualified Education Expenses; for purposes of 529 and Coverdell ESA plans

• Tuition and fees;
• Books, supplies and equipment; Computers and Software
• Room and board expenses for students enrolled at least half-time only to the extent they are not more than the greater of
• The allowance for room and board included in the cost of attendance for federal financial aid purposes, or
• The actual amount charged if the student resides in housing owned or operated by the eligible education institution; and
• Expenses for special needs services required by a special needs beneficiary and incurred in connection with enrollment or attendance.