I took a 1099Q distribution after my student is graduated and no longer my dependent because I will have no more college expenses to pay but I requsted the distribution because she has numerous scholasrhips which is why I had leftover QTP funds. This meets the IRS exception to make the taxable earnings portion not subject to the 10% extra tax but Turbo Tax didn't ask about that and put my taxable amount onto Form 5329 Part II line 5 and nothing line 6 causing a result on line 7 of the total earnings distribution from line 5 to be made subject to the 10% penalty calculated on line 8 and put it on schedule 2 line 8 as well, adding to my tax on line 23 on form 1040. Is the only way to fix this to print my forms and change this and file by paper?
mydtaxes,
In the Desktop version of TurboTax that I use, I can directly fix it i Forms View. So one route you might take is to purchase the appropriate download (or a CD from a store such as Costco) and follow the instructions in
I will though attempt to see if I can tease the Step-by-Step mode to reveal the exemption checklist.
Didn't find a way for Step-by-Step to reveal the scholarship exception.
So the deal with purchasing a download and transferring your online data to it is the only option I can suggest. You won't, of course, pay for e-filing online and will have prepaid for e-filing via the desktop.
Thanks. I appreciate the response. I already had to pay for my TurboTax (online) Premier before I could even view my forms so I'm thinking I'd not like to pay again to fix their error/oversight. Looking for other responses. But still good to know for next time
The best option would be to call support and request a download TurboTax program where you can make the necessary adjustments on the forms. They may be able to do that if they can't offer a better solution. Also, if you make adjustments on the forms or by using the option I will mention next, you may invalidate your TurboTax accuaracy guarantee at least as it applies to this particular issue, so you may want to get some guidance from our support team.
If the education expenses were paid for from tax-free scholarships, then you are correct you would be exempt from the penalty on earnings upon withdawal of the education savings funds. You are instructed to enter expenses associated with the distributions when you go through the 1099-Q entries in TurboTax. If you enter education expenses equal to the earnings reported on the form 1099-Q then your earnings won't be taxed and form 5329 will be completed properly, as your distribution will show on line 5 and the exempt portion of it will show on line 6. The worksheet in TurboTax will be incorrect, as you won't have an entry on line C of the worksheet, where tax-free scholarships are mentioned, but that worksheet does not get submitted with your tax return so the return will be correct. I admit is is a work-around of sorts, but it will give you an accurate tax return. Just make sure you answer the questions in the education expenses portion in a manner that insures you don't qualify for an education credit.
(edited 3/17/23 at 7:10 AM PST)