You don't mention whether you tried to change line 17 (used for credit or deduction), on the student information worksheet to $4000. That's the simple solution. I'm also curious if that can be done in online TT.
You may have to leave box #6 checked “Recipient is not Designated Beneficiary”, as this may prevent you from e-filing. That 1099-Q worksheet is not sent to the IRS.
*In “Your 2020 Income Summary”, “Less Common Income”, “Miscellaneous Income, 1099-A, 1099-C” it does show $20,835 (which makes sense)*.
Yes, that will show there. But later at "(Name). Here's a picture of your 2020 income" The summary should show $2957 as "other income".
*All the education numbers that we can see appear to support that this workaround calculated correctly and adjusted $4000 to now be taxable money*
Not exactly. The $4000 is now the non qualified portion of the 529 distribution. Resulting in $2957 taxable money.
*In the “1099-Q summary of distributions “ it indicates $2,957 as a taxable amount. With these changes, the resulting Federal tax refund increased by the full AOTC less the expected tax amount on the $2,957*.
That's the result we want. The 1099-Q worksheet should also indicated 0 as the amount subject to penalty.
