Hal_Al
Level 15

Education

Q. Do I have to reconcile this in any way?  

A.   No.  There no reconciliation required on any tax forms.  Yes, you want your own records to be reconciled and you have apparently done that.

 

Q. Do you have to take 529 withdrawals in the same calendar year as the 1098-T says?

A. No.  But you do have have to take 529 withdrawals in the same calendar year as you actually paid expenses.  That is, you go by your own records, not the 1098-T. 

 

Q.   I am not wanting to raise any red flags (especially as a late filer). 

A. Red flags can not be avoided, since the IRS does not have a form for reporting the 1099-Q and showing your calculations.  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.  When you claim a tuition credit, you submit form 8863. When you claim savings bonds for education, you submit form 8815. When you claim you used all you 529 distribution for education, you submit nothing.  You simply omit it from your return.

 

At least two users have reported receiving a CP2000 letter, from the IRS,  on 529 distributions. They replied that their child was in college and the distributions were for qualified expenses, which they listed, but they did not provide receipts.. They  later received a notices saying they were in the clear.  I, personally, received a CP2000 for a 529 plan distribution. I simply provided copies of the school's billing statements as proof and was cleared.