One issue is this-
The owners of the account took a distribution in 2021 but did not pay the school until 2022.
Was the payment MADE in 2021, but just not POSTED until 2022?
You can PAY in 2021 for classes that start in the first 3 months of 2022, but not the other way, you shouldn't take a distribution in 2021 that doesn't pay the school until 2022.
The INTENT of a 529 plan is to provide tax-free earnings for education expense use, therefore a Taxpayer could argue that the distribution taken in 2021 fulfilled the intent, even though it wasn't posted until 2022.
As far as "Is the taxpayer eligible for a credit?"
There would be additional information needed to answer that.
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