So here is the situation. I had an excess distribution in 2020 due to paying spring tuition in December, but not getting a receipt until January 2021. Let's use some round hypothetical numbers to go through the details.
- My 529 distribution was $20,000
- My qualified expenses were $12,000
- Therefore, my excess distribution was $8000
- The ESA/QTP Worksheet shows the following:
- Line 5: Total distributed earnings from Form 1099-Q: $8500
- Line 6: Fraction - divide qualified expenses by total distribution ($12,000/$20000 = 0.5454)
- Line 7: Multiply Line 5 by Line 6 ($8500 x 0.5454 = $4636. This is the amount that went into my TurboTax return on Line 8 Other Income.
The IRS is saying that Line 8 on the return should be $8500 not the $4636.
