topic MESP money directly transferred to Roth for in Education

MESP money directly transferred to Roth for

Slyoungerman — Fri, 07 Mar 2025 00:56:53 GMT

Have a mesp MI plan that meets the criteria for 2024 to transfer some funds directly to a ROTH IRA. Received a 1099Q form.

how does that need to be reported (which line) for income tax since not used for education but since it has been in there greater than 15 years, new law as of 2024 states can take money and put directly into a ROTH Ira

Does that 1099Q need to be reported and if so, where on the I come tax form?

Re: MESP money directly transferred to Roth for

Hal_Al — Fri, 07 Mar 2025 14:55:34 GMT

It actually does not get reported. So far, the IRS has not come up with a way to report it like (for example) how you report an IRA rollover.* Like wise, TurboTax has not come up with a way to enter it. They are aware of the problem and are working on it for next year.

In the mean time, I believe this statement still applies:

Just don't enter the 1099-Q in TurboTax. When the box 1 amount on form 1099-Q is fully covered by expenses, or ROLLED OVER to another qualified account (including a Roth IRA), TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records (the work sheet isn't going to tell you anything that will help with an IRS inquiry). You'll need to check the "trustee to trustee rollover" box at the 1099-Q screen.

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."

But, you need to be sure that you meet all the new rules:

$7000 yearly limit
Beneficiary must have earned income that year of at least the amount transferred
Your 529 savings account must be open for over 15 years before funds can be rolled over into a Roth IRA.
It must be a trustee to trustee rollover (the trustee to trustee rollover box will be checked on the 1099-Q)
the Roth IRA must be in the beneficiary’s name
529 contributions made within the preceding five years cannot be rolled over.
$35K lifetime maximum (2024 is the 1st year that the Roth rollover is allowed, so this isn't an issue yet)

The alternative, for those who insist that it has to be entered, is to answer yes at the "Distribution Transfer" screen, even though Roth is not shown there. Answer no to the another rollover in the previous 12 months question.

* The IRS is proposing a new check box 4b on the 1099-Q for a 529 to Roth IRA rollover (trustee to trustee).

https://www.irs.gov/pub/irs-dft/i1099q--dft.pdf

Re: MESP money directly transferred to Roth for

slamny — Fri, 07 Mar 2025 19:19:24 GMT

Thanks.

Do you know If I add myself as beneficary, and move part of the money from daughter, am I qualify for another $35000 rollover to Roth IRA, since it said per beneficary?

Re: MESP money directly transferred to Roth for

Hal_Al — Sat, 08 Mar 2025 12:54:13 GMT

I have not seen any discussion on that gimmick. I would think, at a minimum, the 5 year rule would apply and more likely the 15 year rule. But, that's just a quick opinion.

Google AI says: "Changing the beneficiary of a 529 plan may reset the 15-year clock required to roll over funds to a Roth IRA. " I noted the word "may", concluding that Google doesn't know yet either.