In the 2023 version of turbotax, if you have qualified 529 distributions, received a1099Q, but did not receive the T form from the college because all tuition was paid for the final year in December of the prior year, Turbo Tax throws you into a world of pain.
It will guide you through entering the 529 information, but will not open the guide for qualified expenses. If you leave it like this, everything from 1099-Q in earnings (box 2) will be shown as income on federal and state forms. This is wrong on the face of it, because if really was non-qualified, it would also draw a penalty, which it does not.
TT gives no guidance for what to do next. What you have to do is go into the College Savings Trust fund account, click on the student dependent worksheet 2/3 of the way down, and then fill it out. It is, however insanely complicated, and it took me hours to get to the point where no taxable income was reported, since there were sufficient qualified expenses.
When I spoke to phone support, they were not great. At first she said that I did not have to file form Q if I had enough qualified expenses. This is incorrect. It is sent to the IRS. Next she said that box 2 income on form Q was supposed to be reported as income/earnings, so nothing was wrong. This is also not correct. Parts of box 2 are only reported as income if they are not all spent on qualified expenses.
All in all, 6 hours of my life I won't get back. TT needs to fix this bug so that people get a nice walk through even if they only have a form Q, and not T, as above.
