Education Payment

[Dzeketey4]

Hello,

I made college education payment of $18000 in 2019 for my son. I withdrew from a 529 savings plan twice in 2019 to pay for the college. The first withdrawal of $16000 was made in August and on December 30, I withdrew another $14000 to pay for tuition on January 9th. I then got a 1099-Q for $34000 since I made both withdrawals in 2019. How do I enter this on my taxes? I have a 1098 from the college showing the $18000 that I initially paid but the 1099-Q is showing more.

Thank you for your help

[DavidD66]

Unfortunately, since you withdrew the $14,0000 in 2019, the portion that did not go to pay qualified education expenses in 2019, will be subject to taxes and penalty to the extent it was gain.  You cannot apply your 2019 withdrawal to 2020 payments.  The amount of your distribution used to pay tuition should match the tuition reported on Form 1098-T.  Form 1098-T includes tuition and related fees, but does not include other qualified 529 plan expenses, such as room and board, computers and internet access or K-12 tuition.

You do have 60 days to roll the funds not spent on qualified expenses into the same or another 529 plan to avoid taxes and penalty

[Hal_Al]

Don't do that again.  To be technically qualified, distributions must be taken in the same year as the payment of expenses. You may have a problem if audited. 

The simplest thing is to just not enter the 1099-Q in TurboTax (TT).  The 099-Q is only an informational document. It does not have to be entered.  

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."