Hal - Thanks much for your detailed response. I have few follow-up questions.
Total Fees paid directly to college : $13675.76 (Tuition/Lab - $7802; Room & Board : 5873.76)
Funding Source: $9646.53 from 529 distribution and $4029.23 OOP (checking account)
1098-T Box 1 only shows $7802 (since R&B is not qualified expense for AOTC)
1099-Q Box 1 shows $9646.53
I understand in my scenario, the 1099-Q distribution is not taxable, since after discounting $4000 for AOTC, the remaining $9676 > $9646 529 distribution. Hence, you suggest not to report the 1099-Q on MY return / my son's return (he anyways doesn't have any income from any source).
Given that IRS has a copy of the 1099-Q from the 529 company showing $9646 total distribution, how does IRS know that none of this $9646 is not taxable? Especially, since the 1098-T shows only $7802 and after adjusting for $4000 AOTC, it leaves only $3802 to adjust for $9646 in 529 distribution?
Also, how do I account for the $4029 in OOP expenses I paid to the college, in TurboTax?
