Excess scholarship amount and 529

[Hal_Al]

Q. Would I have to amend each of my children's tax returns for 2023 or can I just amend mine?

A. It depends on the amounts of taxable scholarship.  

If taxable scholarship is the student's only income, there will be no tax until the amount gets to $14,600.  So, there is technically no requirement to file, 

Normally I would say, you may want to file anyway just to document the reporting of the scholarship as income.  But, in this case, probably not. 

[Anon_12]

Thank you very much! 

What would I put down for box 1 and box 5 on the amended return if I originally put down 11862 in Box 1 and 11060 for box 5 on the original 2023 1040? I don't know if putting 4000 in box 1 and leaving box 5 blank would be too drastic of a change.

[Hal_Al]

Q. What would I put down for box 1 and box 5 on the amended return if I originally put down 11862 in Box 1 and 11060 for box 5 on the original 2023 1040?

A. $4000 in box 1 and box 5 blank.

Q. I don't know if putting 4000 in box 1 and leaving box 5 blank would be too drastic of a change?

A. No

You shoulda got $802 AOC in 2023.  $4000 will get you $1698 more.  The AOC is 100% of the first $2000 and 15% of the next $2000.  

So, entering $2000 in box 1 and box 5 blank gets you $1198 more.

The big question is how does the student's return change with an additional $3198 of income. 

[Anon_12]

Wait, doesn't the amended return just replace the original return values for box 1 and 5?

I entered 11862 in box 1 before and 11060 in box 5, so what would I enter now for each box?

They received all the taxes back on their return and made way less than 14000 even with adding 3198.

[Hal_Al]

Q. Wait, doesn't the amended return just replace the original return values for box 1 and 5?

A. Not exactly. What you enter is not sent to the IRS. TurboTax uses those numbers to recalculate the credit.  On form 8863, $802 is changed to $4000. 

Alternatively (to entering $4000 & $0), you could enter $11862 in box 1 and $7862  in box 5.  But do not enter any other numbers, either way.   On form 8863, $802 is changed to $4000, either way.  The AOC is changed from $802 to $2500. 

Q. They received all the taxes back on their return and made way less than 14600 even with adding 3198.

A. As previously stated, you do need to file amended returns for  them.  This assumes they have  is no  unearned income (interest , dividends, 1099-Misc) over $400 ($450 for 2024).