Helping a friend with their taxes. They withdrew funds from their QTP for their son's first year in college. They withdrew enough to cover both the Fall, 2022 and Spring, 2023 semesters. However, they did NOT pay the Spring tuition until January, 2023. (Form 1099-T reflected the Fall tuition amount.) Can I claim the full amount as non-taxable, or since it was paid in 2023, will he have to add the difference to his 2022 tax returns and add the penalty?
No, if the entire QTP distribution was for Qualified Education Expenses (including Room and Board), the 1099-Q does not need to be entered into the return.
For most qualified education program beneficiaries, the amounts reported on the 1099-Q aren’t reported on a tax return. However, if annual distributions exceed your adjusted qualified education expenses, you may need to report some of the earnings reported in box 2 as income on your tax return and pay an additional 10 percent tax on it as well.
Enter the 1098-T as reported in the Education section.
Here's more info on Form 1099-Q.
Technically, the distribution must be in the same year as the payments made. But, this is a common problem, for further discussion, see: