I just worked through an education related situation involving more than two hours on the phone with TT support and wanted to give a heads up to anyone else who may run into this.
I have a child attending college who has a 529 savings plan to cover all of her eligible expenses. I received a 1098-T from the university as well as a 1099-Q from the 529 provider. When we disbursed funds from the 529 directly to the university, it was for the exact amount owed (tuition, fees, room and board). After entering all of this information into TurboTax, I received an unexpected message that a portion of the 529 disbursement will be considered taxable income for my child.
There is an old thread about making sure to enter your 1099-Q BEFORE entering your 1098-T or else this problem can come up. Here is the thread: Why 1099-Q form increased my tax?
What happened to me in this situation was when first entering the 1099-Q, I was directed down a path asking if I received a 1098-T for my child. After selecting Yes, I was then instructed to enter all of the 1098-T information. This in essence caused the problem referenced in the above thread and makes TT believe there was a taxable distribution from the 529 plan. The fix was to delete all of the 1098-T and 1099-Q information and re-enter in the appropriate order - 1099-Q first and then the 1098-T. Make sure to select NO when entering the 1099-Q and it asks if you have a 1098-T to enter (go back and enter the 1098-T after fully entering the 1099-Q).
