Hi, all. I have a question about how to enter information into TurboTax properly for the following situation:
- I am using a 529 plan to pay for my nephew's law school
- My nephew's tuition in 2020 was 17,282
- My nephew received a scholarship in 2020 of 13,500
- I used the 529 plan in 2020 to pay tuition directly to the university (minus the scholarship amount)
- I also withdrew from the 529 plan (recipient = me) in 2020 to cover other qualified expenses (books, room & board, etc.)
- I also withdrew from the 529 plan (recipient = me) in 2020 the amount of the scholarship (13,500) so I could use that to help pay for other (non-qualified) expenses for my nephew.
This means there are two 1099-Qs. One with recipient = nephew, but that was just for the amount sent directly to the university to cover tuition minus scholarship. The other is recipient = me, containing the scholarship amount and other non-tuition qualified expenses.
My understanding is that I need to pay taxes on the earnings portion of the 13,500, but not the 10% penalty. Otherwise, none of the rest of the distributions are taxed.
My problem: How do I enter this? I think I'm in a catch-22 (catch-529?!):
1) I cannot (should not?) enter the 1099-Q with recipient = nephew, as TurboTax says it's unnecessary, and removes it for me when I try
2) On the page "Non-dependent student expenses", I dutifully broke out all expenses, including tuition, even though those distributions were reported on the 1099-Q that TurboTax didn't want to know about; I listed the $13,500 scholarship under "Tax-Free Assistance".
So I'm in a situation where TurboTax is made aware of the FULL expenses via the "Non-dependent student expenses" page, but is unaware that I did withdraw from the 529 plan an amount to cover tuition (minus scholarship). Therefore, on the ESA/QTP Wks, TurboTax started with the 1099-Q I did report (for the qualified non-tuition expenses + scholarship withdrawal), and deducted the full expenses from that (including the tuition expenses), arriving at Part III, Line 4 (excess distributions) = $9677, which is too small (should be $13,500, right?)
So when TurboTax calculates my tax liability, it thinks I only need to pay taxes on the earnings portion of $9677, instead of on the earnings portion of $13,500. At least, I think that's what's happening. If I could get TurboTax's ESA/QTP Wks to start with the distributions from both 1099-Qs, I believe the numbers would work out properly. But I'm concerned about overriding form values, as that might disqualify my return from being electronically fileable.
What's the best way to get TurboTax to calculate the correct number AND still be able to file electronically?
Thanks for any help you can provide!
