What if there were excess distributions from the 529 plan?
My son has $750 in earned income and $200 in excess 529 distributions. That total is below the $1100 threshold.
I went through the IRS do-i-have-to-file wizard. The answer appears to turn around my response to, "Are you liable for an additional tax on a qualified plan, including an Individual Retirement Arrangement (IRA), or other tax-favored account, in 2020?"
If I answer yes, it says he has to file. If I answer no, it says he needn't.
- The 529 plan is a tax-favored account. I think.
- The details on the wizard refer to publications with titles about IRA and about "Health Savings Accounts and Other Tax-Favored Health Plans". (I added the underline.)
529 plans are neither IRA nor Health Plans, so I conclude that the mere fact he has a small excess distribution from the 529 plan does not require filing a tax return.
Does that sound right to you? Does $200 of excess 529 distribution (with $49 of the distribution attributable to *income*) compel filing a return?
