" Not reporting 1099Q in tax return is not a solution".
Yes, it is. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. So, even if you managed to get TT to calculate your taxable portion as 0, you woulda still got that same IRS letter. I know that for a fact, as I did it that way and got that IRS letter. I sent them copies of the school's billing statements. That took care of it.
Another user reported that he forced TT to report the taxable amount ($0) on to line 8, of Schedule 1 and still got the same IRS letter. At least two other users have reported receiving a CP2000 letter, from the IRS, on 529 distributions. They replied that their child was in college and the distributions were for qualified expenses, which they listed, but they did not provide receipts.. They later received a notices saying they were in the clear. We have noticed, here in this forum, that the number of 1099-Q notices, from the IRS has dropped off significantly in recent years. Yours is actually the most recent one we've heard about. Please let us know how it is resolved.
