So I know that the common guidance on taking scholarship money out of a 529 plan is to do it in the same year the scholarship was earned; of course if you don't know if your child may go on for an advanced degree, this may not be the best path. It also seems that the IRS guidance on this is silent and that this guidance seems to be coming from best practice from finance/tax experts. (If there is explicit guidance from the IRS on this please share). However, since I am not a finance or tax expert, only an individual following IRS published tax guidelines, how would I be expected to follow best practice used by paid professionals? Has anyone actually tested this and taken scholarship withdrawls after the fact, and if so, were you audited? Because if I'm audited, wouldn't the IRS have to show me the guideline or rule that I violated? And does one exist? (and yes I know I can test it myself and find out so no need to reply with that). Thanks for any insight.
