withdrew money from 529 account not for educ expenses. got a 1099-Q form. when i enter the amounts in turbo tax, it adds the gross distribution to my income, not earning

[zman1009us]

from my understanding, only the earnings should be taxable. but turbo tax adds the full gross distribution to my income

[KrisD15]

The amount taxed will be listed on Schedule 1 line 8z and should only be the earnings portion listed in Box 2 of Form 1099-Q.

That will flow and be included on your 1040 line 8 (although 1040 line 8 might also include other income reported)

The penalty tax for that distribution (10%) will be listed on Schedule 2 line 8 and will flow and be included on your 1040 line 23, although that line on the 1040 could also include other taxes reported. 

If this does not look right, please go back to the entry screen for the 1099-Q and make sure the earnings in reported in Box 2. 

HERE is how to view your 1040 using TurboTax Online

[zman1009us]

When i try to enter the earnings on turbo tax, i cannot continue without including the gross distribution and basis.  turbo tax is using my gross distribution in my income (not the earnings).

for the 10% penalty amount, where do i enter that on turbo tax?

[KrisD15]

Are you entering Form 1099-Q in the Education section under Deductions & Credits?

Are you then saying the distribution was not used for education? 

The earnings in Box 2 goes to Schedule 1 line 8z

flows to Form 1040 line 8

The 10% penalty tax is on Schedule 2 line 8

flows to Form 1040 line 23

You report the 1099-Q, not as separate entries. TurboTax will separate the amount in Box 2 from Box 1. 

[zman1009us]

I entered the numbers from the 1099-Q.  the distribution was not for educational expenses.

turbo tax is adding the full disbursement to my income, not the earnings.  i called turbo tax and they said there is a programming issue with this and are working to fix it.

I have not seen where turbo tax is calculating the 10% penalty.

[KrisD15]

What program are you using and is it Desktop or Online?

I have tested Desktop and the program is using earnings only. 

I tested Online and again, the distribution was handled properly. 

There is no known error in the software. 

Did you manually type Form 1099-Q into the program? 

This should be entered under

Deductions & Credits

Education

ESA and 529 qualified tuition programs (Form 1099-Q)

[Edited 3/24/2025 I 1:50pm PST]

@zman1009us

[zman1009us]

I manually entered the numbers and am using Turbo Tax desktop.  I submitted an error report to Turbo Tax.  maybe it is fixed.  I will check tonight.  I know i entered the amounts correctly and entered them in the correct spot. 

I still do not know where to enter the 10% penalty amount in turbo tax.

[AmyC]

I am using desktop. I have entered a 1099-Q with easy to follow numbers. When I switch over to forms mode:

• the Q correctly shows the amounts I entered
• Sch 1 line 8z shows just the earnings

Switch over to forms mode and check your Sch 1.

For the penalty:

Locate Form 5329-T

Part II

Look at lines 5-8

The additional tax, the 10% penalty, shows on line 8.

If this is not what you are seeing, there is a wrong answer in the entry section and you need to review your answers.