Turbotax desktop telling me some of my 529 distribution is excess. All distributions should be qualified. How do I fix this?

[alexa-and-matt]

I have two kids in college. Two 1099Qs. For one, turbotax is saying that some of the disbutrions are excess. But only for "regular tax purposes." For "10% additional tax purposes," it considers all distributions qualified. All distributions were for tuition or room and board and should be qualified. I can't see anything causing this. Seems like a bug. For my other child, it correctly identified all distributions as qualified. How do I fix this?

[AmyC · Accepted solution]

Two things to take into account:

1. The order in which you enter the forms  can cause the issue. The program may be trying to hold some of the money for education credit, which would cause your issue. One solution is to delete the Q and re-enter it. Always enter the 1098-T forms and expenses before adding the Q.

2. If you have 1099Q forms that are not taxable, the IRS would prefer you not enter them. IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.

Either way, always keep your Q, T and supporting documents.