I use a certified tax preparer for filing. He uses his own filing software.
I have a 1098-T from my son's college (Purdue University, Indiana) with Box 1 tuition expenses as $38K, Box 5 Scholarships as $855 and no other numbers.
I also have a 1099-Q from the 529 account showing Box 1 Gross Distribution as $17K - I received the check and deposited into my account after paying the $38K. In my mind, all this should be qualified distributions since I received less than half of the tuition amount that I paid.
However, in the tax form 5329, I see that line 5 is showing the distribution amount as $535 with a tax penalty of $54. Schedule 1 Line 9 and 1040 Line 8 also include this $535 amount.
As far as I read, I did not see any limitations on the 529 qualified distributions by income. Does anyone know what triggered this $535 non-qualified distribution & penalty?
My "certified" tax preparer is clearly not knowledgeable because he keeps saying 529 triggered it and IRS imposes limits without providing any details.
Thanks!
Srini Venkat
