Q. Can I still withdraw from the 529 before the April 15th deadline?
A. No. Dec 31 is the cut off for a 2025 distribution. It's also not clear why you think you coulda withdrawn more. More would be subject to both tax and penalty. With your numbers, the scholarship amount was not going to totally eliminate the penalty.
"Side note: I withdrew $9000 separately, so I have records stating earnings were $3628 on that $9k."
That's not clear. The 529 plan will issue a separate 1099-Q for that distribution or combine the two distributions on one 1099-Q. Either way, the money taken out of a 529 plan is documented with 1099-Q(s). I'm assuming $31, 732 is your total distribution (the $9000 does not need to be accounted for separately at tax time).
Are you sure R&B is on the 1098-T? That is very unusual (but not unheard of).
Since the student has no other income and the scholarship is not restricted, one thing you can do is have him declare the $9000 as taxable income. Then $9000 more of the 529 distribution is qualified and both the tax and penalty are reduced. . He will not pay any actual tax on the $9000, as his standard deduction is more than $9000*.
There was an update today. TT appears to be working better in the education section. I suggest you combine the box 1 numbers and enter only one 1098-T. If you use the taxable scholarship option, leave box 5 blank when you enter the 1098-T, on your return. If you still have problems, reply back for a workaround.
*Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $15,750 filing requirement (2025) and the dependent standard deduction calculation (earned income + $450). It is not earned income for the kiddie tax and other purposes (e.g. EIC).Taxable scholarship goes on line 8r of Schedule 1, from which TT treats it as hybrid income.
When you enter the 1098-T, on his return, enter it with $0 in box 1 and $9000 in box 5.
