topic 1099-Q for 529 plan in Education

1099-Q for 529 plan

MMorash — Thu, 06 Feb 2025 19:04:07 GMT

Last September I switched my granddaughter’s 529 from one financial institution to another. She’s only 4, no money was withdrawn, money was sent from a Raymond James 529 account to Fidelity UFund. Raymond James has filed a 1099-Q, The Trustee to Trustee transfer box is checked. When I enter this information in TurboTax, it significantly reduces my refund amount. I was under the impression that moving money from one 529 plan to another should not create a taxable event.

Re: 1099-Q for 529 plan

Hal_Al — Thu, 06 Feb 2025 19:10:23 GMT

You are correct, you do not have a taxable event.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including a roll over to another plan, to cover the distribution. When the box 1 amount on form 1099-Q is fully covered (and it is in your case), TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records.

References:

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.

Just delete the 1099-Q and not have to deal with the complicated 1099-Q interview.

Re: 1099-Q for 529 plan

MMorash — Thu, 06 Feb 2025 20:18:03 GMT

Thanks