TurboTax will only taxes the earnings in box 2 of form 1099-Q when the distribution is not used for education. Please revisit the entry of your form 1099-Q to check that box 2 is properly entered.
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I closed my ESA in 2020. My 1099-Q does not show anything in box 2 or 3. Don't I need that to figure out the tax liability? The FMV was shown at the bottom, which is nearly 0.
Since TurboTax is not giving you the correct results when you enter the information from the 1099-Q, you can enter the amounts from your financial records that reflect the actual amount of the non-qualified deduction and penalty.
It is not compulsory to enter the 1099-Q. Just keep the 1099-Q and the financial records that you used to prepare your return. If your overrides are preventing you from efiling, you can completely remove the 1099-Q entry and add you own figures to get the correct amount of taxes that you owe.
There is actually NO reason to enter the 1099 Q into TurboTax unless 1- you don't know if you have taxable income and you need help from the program to figure it out or 2 - you have taxable income to report. (the form itself even tells you this in the second sentence of instructions for recipient).
Received a 1099-Q for withdraws for my student from account set up by grandparent. Total was $50,867. The 1098-T has payments received of $51,162. TT says there is an excess of $10,000 and taxing student beneficiary. The 1098-T doesn't include off campus room and board and supplies. I realize I don't have to put in the 1099-Q. Do I then just not put in any of the expenses and keep for our own records in case of an audit? Or is there somewhere that I need to report all the expenses paid with the 529. Thank you.
Correct, you just keep a record of your expenses for future reference in case it is necessary. For your convenience, you can upload documents to TurboTax using the documents feature. This way your documents will be in the cloud along with your tax return.
One more question - the 2020 1098-T I received from the college reports the payments they received from us for the 20-21 school year tuition paid. It was money received from aug - dec 2020. However, in Jan-March of 2020 I paid $21k for 19-20 school year expenses. I don’t see that reflected on the 1098-T. Are eligible expenses for the AOTC based on calendar year or school year? Thank you so much.
When I enter the gross distribution portion of my 529 colorado savings plan nonqualified withdrawal, it keeps taxing me in PA. My husband is military active duty and we are doing a joint return. I am CA and my savings plan is CO. Basically everytime I enter my gross distribution it is charging over $700, but my earnings was only 100. Everytime I take out the gross, it is back at zero with PA. It will not let me move forward. I was told that it would only charge my earnings thats it. What is going on?
The system is "looking" for the qualified educational expenses incurred that would equal the distributions received. You say you are CA, savings plan is CO, but I am not sure what PA has to do with anything unless that is where the school is at, possibly? I am just trying to understand with your multi-state situation where PA fits in is all. Having said that, if you've withdrawn funds from a 529 plan and did not use the money towards qualified education expenses, then you will be taxed on these moneys that you withdrew.
The AOTC offers a 100% credit for the first $2,000 used to pay for education expenses and 25% for the next $2,000 used, for a maximum credit of $2,500 if you spend $4,000 on qualified expenses.
Money in a 529 plan can only be withdrawn tax-free when used for qualified expenses that were not covered by payments that generated the AOTC. So, in this scenario, the taxpayer would subtract $4,000 from the qualified educational expenses they paid when determining how much they should withdraw from their 529 plan.
State-level income tax benefits can vary. Some states don’t offer any perks for using a 529 plan, while others will let you deduct a portion of your contributions from your state taxable income. For example, Massachusetts lets you deduct up to $1,000 in 529 plan contributions ($2,000 if married, filing jointly) from your state taxable income.
Also, keep in mind that you can use another state’s 529 plan if your state doesn’t offer a tax benefit, or if another state’s 529 plan offers lower fees or better investment returns. It’s important to do your homework and research all of your options first. To learn more about each state’s 529 plan tax benefits.
Oh sorry for the confusion. My husbands residency is PA.
okay so then the tax amount due is correct then, it’s charging me $761 for state tax on a 24k distribution. Perhaps there are deductions in play since it is technically less than 10%. I know Like a few hundred is taken off my of federal return as well