Turbotax not allowing me to enter tuition expenses to offset QTP distributions

[catsknit23]

I took distributions on my daughter's QTP this year to pay her college tuition. The money was sent directly to my bank as it was much faster than delivery to the school would have been. So the 1099-Q's (2 states) show me as recipient. I have entered those but when I try to enter the 1098T it says my income is too high for the Education credit but to continue anyway so I won't be taxed on the QTP distributions. However, when I proceed to the next page it tells me again that I can't claim a deduction and there are no qualified education expenses.

Box 1 on the 1098T is $38,628 and I paid $16,900 from the QTPs and my savings directly to the school.

Every year TT messes this part up so much. I am about ready to ditch it and see a tax preparer in person.

[MinhT1]

In your case, as the tuition paid more than covers the distribution from the QTP, you do not need to enter form 1099-Q at all on your tax return.

On form 1099-Q, instructions to the recipient read: "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." 

Just keep records of the tuition payment in your tax records in case of an IRS inquiry or audit.

[Hal_Al · Accepted solution]

The 1099-Q is just an informational document. You are not required to enter the numbers  on your tax return.  There is no place on the tax form to report a non taxable 529 plan distribution. A tax preparer isn't going to be able to help you do something that can't be done. 

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. 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  (look for the 1099-Q worksheet). You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit, if you are otherwise eligible.

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." 

[gahudock]

Similar circumstances and agree that TT does not handle this correctly. Very irritating and costly for those who don't check what TT is doing VERY carefully.

[catsknit23]

Yeah, it doesn't ask you whether you need to enter this document, only asks if you received one. So of course I said yes.

[gahudock]

Intuit, are you listening? Adding some simple logic to TurboTax would fix this issue and improve your product, instead of leading people down a path that DOES NOT WORK FOR THEM.