refunds to 529 exceed 1099-Q for tax year

[rtichy]

I made payment for spring semester of 2020 in December 2019, using my son's 529 plan.

I made two more payments in 2020 from the 529 plan, too.

Courses were withdrawn from, also, and refunds back to the 529 plan were made.

The refunds in 2020 exceed the value of the disbursements in 2020 because some of the refund came from the money sent in December 2019 for the spring 2020 semester expenses.

TT tells me the refund amount cannot exceed the amount on the 1099-Q.  Do I have a problem, for tax purposes, or do I just "cap out" the amount returned to the 529 to match the disbursements in 2020?

[KrisD15 · Accepted solution]

You don't need to report the 1099-Q as long as the distributions were returned to the account. 

IRS Pub 970

[Hal_Al]

Yes, just cap out.

If the entire amount of the 529 distribution was used for qualified expenses and/or returned the the account within 60 days of the refund (even if for different years), you do not need to report the distribution at all.

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." 

You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip! 

[rtichy]

Thanks for the clear answers, to both of you!