Q. If you are confident on the math that your 1099-Q distribution is less than or equal to valid 529 expenses, is there any benefit in putting the 1098-T and the 1099-Q forms into TurboTax?
A. Simple answer: No TT will prepare a work sheet showing how it got to none of it taxable, But that's info you already know: add up your expenses, subtract amount claimed for a tuition credit, subtract amount covered by tax free scholarship. If the net amount is more than the distribution, none of the distribution is taxable.
Q. To confirm: The only reason to enter the 1099-Q (and possible associated 1098-T) would be if you actually do have to pay taxes on the 529 distribution?
A. Yes.
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.
At least two users, here in the forum, 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. A third reported that he just sent a copy of the school's billing statement and was cleared.
