topic TurboTax is not giving me credit for the $10,000 qualified education loan payment using 529 Plan funds in Get your taxes done using TurboTax

TurboTax is not giving me credit for the $10,000 qualified education loan payment using 529 Plan funds

laurieandbillmcd — Sun, 14 Mar 2021 02:53:56 GMT

Starting in 202, 529 plan account owners may now withdraw up to $10,000 tax-free for payments toward qualified education loans; however, TurboTax is not giving me credit for the $10,000 payment I made. This is making my 1099-Q income much higher in Other Income, plus the additional 10% tax for "non-qualified" 529 plan distributions.

I entered the loan payment in the interview sections and then reviewed all the forms when I was getting a large amount of tax due. I found that the 1099-Q Payments Worksheet (QTP Computation of Taxable Distribution) is wrong, as it isn't giving me credit for the loan payment. Line 2a "Qualified Loan Payment" is blank. This results in $5,829 of 1099-Q income. However, if I go to the Student Info Worksheet, Part VIII (QTP - 529 Plan) the $10K loan payment is there, and that results in the CORRECT amount of $717 taxable 529 earnings. But the latter doesn't feed the Other Income section of Form 1040. The only way I could get it to adjust was to override the boxes in Form 1099-Q Payments Worksheet (QTP Computation of Taxable Distribution) Line 2a "Qualified Loan Payment" to add the $10,000 loan payment amount, which in turn adjusted the Other Income amount to $717 and the 10% tax to $72.

What is driving this problem? Is it an error in TurboTax? How do I fix it?

Re: TurboTax is not giving me credit for the $10,000 qualified education loan payment using 529 P...

MaryM428 — Sun, 14 Mar 2021 22:38:47 GMT

It is not compulsory to enter the 1099-Q. In your case, you were able to get the correct figures with your overrides and you can use those figures to file your 2020 tax return. 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).

Re: TurboTax is not giving me credit for the $10,000 qualified education loan payment using 529 P...

laurieandbillmcd — Wed, 17 Mar 2021 02:04:12 GMT

hi Mary,

So I do have taxable income to report as stated: the $717 + 10% penalty tax. Are you talking about not entering the 1099-Q info into TurboTax? The interview questions that you go through in the program don't seem to feed the 1099-Q worksheet correctly, which in turn gives the wrong amount of Other income in the income section; and also the incorrect penalty tax in the taxes due section. I'm confused with your answer.

Regards,

Bill M.

Re: TurboTax is not giving me credit for the $10,000 qualified education loan payment using 529 P...

MaryM428 — Thu, 18 Mar 2021 01:14:54 GMT

I am saying to enter your actual financial amounts from your own records instead of the amounts on the 1099-Q.

@laurieandbillmcd