2025 Tax Filing — 529 to Roth IRA Rollover Question

[v64checks]

I am filing my 2025 federal tax return and have a complex situation involving a SECURE Act 2.0 Section 126 529-to-Roth IRA rollover that I need help with. Here is the complete picture:

Background: I initiated a custodian-to-custodian rollover from the WA State GET 529 plan to my Fidelity Roth IRA. The rollover was split across two tax years — $6,386.34 designated as a 2024 contribution and $7,000 designated as a 2025 contribution. After the rollover, I realized my 2024 earned income was only $2,229, making $4,771 of the 2024 contribution excess. Fidelity was unable to return the funds to the 529 plan, so I requested a return of excess contributions. Fidelity returned both the full $7,000 2025 rollover and the $4,771 2024 excess — totaling $11,771 — to my Fidelity brokerage account. The remaining Roth IRA balance of ~$1,618 represents only my direct 2024 contributions within my earned income limit. My dad separately paid tuition out of pocket.

Tax Forms Received:

1099-Q (WA State GET): Box 1 Gross Distribution $13,386.34, Box 2 Earnings $1,479.83, Box 3 Basis $11,906.51, Box 4b QTP to Roth IRA Transfer checked.

1099-R (Fidelity): Box 1 Gross Distribution $11,771.00, Box 2a Taxable Amount $0.00, Distribution Code 8J (return of excess Roth IRA contribution).

My Specific Questions:

1. Of the $13,386.34 distributed from the 529, approximately $2,229 legitimately stayed in the Roth IRA (within my 2024 earned income limit) and the remaining ~$11,157 was returned to my brokerage account. Since I paid tuition separately, can all ~$11,157 be offset by 2025 qualified education expenses to shelter the earnings from tax? Or is only the $7,000 2025 portion eligible for the tuition offset, with the $4,157 2024 excess portion's earnings being taxable because 2024 qualified expenses have passed?

2. TurboTax is still showing a "Check This Entry" error on the 1099-Q Box 4b, saying the software has not updated to support QTP to Roth IRA transfers yet. How should I enter the 1099-Q and 1099-R Code 8J in TurboTax while this update is pending, and is there a workaround?

3. Should I file an extension  if TurboTax has not updated by early April?

[AmyC]

1. If you have at least $11,157 in qualified expenses (tuition, fees, books, or room and board) in 2025, you can shelter the earnings portion of that entire amount. It does not matter that your father paid the tuition; as long as the student (you) is the beneficiary, the expenses count to offset the distribution. Here is why:

The 1099-Q holds the key - the IRS matches it against your expenses.

2. If the Q is used on qualified expenses, it should not be entered. Delete it and tuck it in your tax folder. Enter the 1099-R. Code 8 for excess. Code J for Roth. Box 2a is $0. This tells the program and IRS that you put in too much and took it back out. No tax.

3. An extension is for time to file, not pay. With no taxable Q or R income, you seem safe to file an extension. You can file an extension and then file your tax return 30  minutes later. It is not a hindrance.

Let me repeat the big giant ifs:

IF the entire Q covers room and board along with education, do not enter. 

IF you have education expenses equal to or greater than $11,157, the excess is not taxable.

I also recommend doing something nice for your dad 🙂

[v64checks]

Thank you Amy, this is very helpful. I want to clarify one detail that I may not have made clear — both 529 distributions actually happened physically in early 2025 (February/March) and, GET processed them as two separate transactions and issued two separate 1099-Qs:

1. First 1099-Q (designated as 2024 contribution): $6,386.34 distributed from GET and rolled into my Roth IRA, designated as a prior year (2024) contribution since we still had time before the April 15 deadline. Since my 2024 earned income was only $2,229, the excess of $4,771 was returned by Fidelity.

2. Second 1099-Q (designated as 2025 contribution): $7,000 distributed from GET and rolled into my Roth IRA as a 2025 contribution. The full $7,000 was subsequently returned by Fidelity.

Fidelity issued a single 1099-R combining both returns — Code 8J, Box 1 = $11,771 ($4,771 + $7,000), Box 2a = $0. The $2,229 within my 2024 earned income limit legitimately remains in my Roth IRA as my 2024 contribution.

Given that both distributions happened physically in 2025 and my qualified education expenses for 2025 are $38,000, does your guidance still hold — meaning both 1099-Qs can be omitted? Or does the first 1099-Q designated as a 2024 contribution need to be handled differently on either my 2024 or 2025 return?

---

[v64checks]

Thank you Amy, this is very helpful. I want to clarify one detail that I may not have made clear — both 529 distributions actually happened physically in early 2025 (February/March), but GET processed them as two separate transactions and issued two separate 1099-Qs:

1. **First 1099-Q (designated as 2024 contribution):** $6,386.34 distributed from GET and rolled into my Roth IRA, designated as a prior year (2024) contribution since we still had time before the April 15 deadline. Since my 2024 earned income was only $2,229, the excess of $4,771 was returned by Fidelity.

2. **Second 1099-Q (designated as 2025 contribution):** $7,000 distributed from GET and rolled into my Roth IRA as a 2025 contribution. The full $7,000 was subsequently returned by Fidelity.

Fidelity issued a single 1099-R combining both returns — Code 8J, Box 1 = $11,771 ($4,771 + $7,000), Box 2a = $0. The $2,229 within my 2024 earned income limit legitimately remains in my Roth IRA as my 2024 contribution.

Given that both distributions happened physically in 2025 and my qualified education expenses for 2025 are $38,000, does your guidance still hold — meaning both 1099-Qs can be omitted? Or does the first 1099-Q designated as a 2024 contribution need to be handled differently on either my 2024 or 2025 return?

[v64checks]

Thank you Amy, this is very helpful. I want to clarify one detail that I may not have made clear — both 529 distributions actually happened physically in early 2025 (February/March), but GET processed them as two separate transactions and issued two separate 1099-Qs:

1. First 1099-Q (designated as 2024 contribution): $6,386.34 distributed from GET and rolled into my Roth IRA, designated as a prior year (2024) contribution since we still had time before the April 15 deadline. Since my 2024 earned income was only $2,229, the excess of $4,771 was returned by Fidelity.

2. Second 1099-Q (designated as 2025 contribution): $7,000 distributed from GET and rolled into my Roth IRA as a 2025 contribution. The full $7,000 was subsequently returned by Fidelity.

Fidelity issued a single 1099-R combining both returns — Code 8J, Box 1 = $11,771 ($4,771 + $7,000), Box 2a = $0. The $2,229 within my 2024 earned income limit legitimately remains in my Roth IRA as my 2024 contribution.

Given that both distributions happened physically in 2025 and my qualified education expenses for 2025 are $38,000, does your guidance still hold — meaning both 1099-Qs can be omitted? Or does the first 1099-Q designated as a 2024 contribution need to be handled differently on either my 2024 or 2025 return?

---

[AmyC · Accepted solution]

Great news!

1. 529 distributions:

• The designation matters for ROTH contribution limits but the tax year of the distribution is strictly dictated by when the money left the 529 plan - in 2025. You can use your $38,000 in 2025 tuition to "cover" this amount.
• Because your total 2025 Qualified Higher Education Expenses (QHEE) are $38,000, and your total 529 distributions were only $13,386.34, your distributions are 100% tax-free.
• IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.

2. 1099-R

You must enter the 1099-R because it was issued with your Social Security number and represents a movement of funds out of a retirement account.

• How to Enter: Enter the 1099-R exactly as it appears (Gross $11,771, Taxable $0, Code 8J).
• Why Code 8J is your friend: Code 8 tells the IRS this was a "Correction of Excess." Code J says it was from a Roth. Because Box 2a is $0, TurboTax will correctly report that you took money back out, but you owe $0 in taxes and $0 in penalties on it.
• The $2,229 Balance: Since this stayed in the Roth and was within your 2024 earned income, it is a valid "prior-year contribution." No further action is needed for this amount.

[v64checks]

Thank you Amy!!