Please clarify how IRS determines that 1099Q funds are used for qualified expenses. I've been challenged two years in a row from IRS on why my 1099Q funds (529 plan) are not reported in 1040. IRS asks for more information on how these funds were used and assumes they are excess (taxable) income. I have filled in the TT forms/worksheets for 1098T/1099Q/529 plan each year which show qualified educational expenses are greater than 1099Q payments. However, it seems the 1099Q income in not reported in 1040 -- the IRS doesn't doesn't believe these 1099Q payments are reported. What am I missing in TT to indicate proper use of 1099Q payments? The income from 1099Q is shown in Education section, but doesn't seem to be sufficient for IRS to determine how funds were spent. The final 1040 form doesn't seem to contain the 1099Q information.
