Ok - so I called Vanguard today and they told me I don't need to do anything because the qualified expenses were INCURRED in 2023 despite being paid in 2024. The rep was seemed to feel very strongly that this is a straightforward situation and nothing would need to be done. Most of the websites out there tend to agree with the advice of trying to pay the college the same year as the withdrawl. For instance
https://www.savingforcollege.com/article/avoid-these-529-withdrawal-traps
#3 states: "Although you will not find this rule explicitly stated anywhere in the IRS’ publications or tax forms, the withdrawals from your 529 account must match the payment of qualifying expenses in the same tax year, regardless of academic year. If you withdraw the 529 money in December for a tuition bill that isn’t paid until January, you risk not having enough qualified education expenses during the year of the 529 withdrawal. Likewise, if you take a distribution in January to pay for expenses from the previous December, that distribution will be non-qualified." The Vanguard rep's information tis not aligned to this.
What's making me question the rep is she said one could not return money to a 529 within 60 days!
The advice is consult a tax professional!
