I (owner of 529) do not report 1099-Q distribution or my son's (beneficiary) Adjusted Qualified Education Expenses on 1040. How does IRS view this distribution, Taxed?

[Jim23]

The entire distribution is nontaxable as I have receipts from the school.  Since I do not report amount of distribution from 1099-Q or Adjusted Qualified Education Expenses, how does IRS view distribution?  Since I am owner and not beneficiary of this account, I am afraid after filing my return I will get a letter from IRS explaining this distribution was taxable and they will list tax and penalty I owe.  Is there a way to be proactive from preventing this scenario?

[JaimeG · Accepted solution]

If the box on the 1099-Q that states "Check if the recipient is not designated beneficiary" is checked sometimes the IRS' computers calculate a deficiency and automatically assess penalties and interest to the account holder (you). Since you have designated the distribution to the Beneficiary you should not have any issues. The best way to avoid all issues is to have the distribution paid directly to the school. This will also protect the Beneficiary by keeping the super-duper computers at the IRS at bay.