I've been contributing to my sons' 529 accounts for years. Recently I discovered I could view my previous tax returns on the Colorado website https://www.colorado.gov/revenueonline. Strangely, the returns on the site do not match the printed returns from Turbotax. After some research, I was able to determine that the tax returns on the Colorado website are all missing our 529 contributions. My 2021 return was just received recently and I noticed it has the same issue.
I'm worried if they use those returns during an audit, I'm going to be told I owe.
Has any other Colorado residents noticed this? Does the issue lie with the transmission of the form from Turbotax or the reception of the form by Colorado?
It could depend on how your 529 account is set up.
Per tax.colorado.gov FYI Income 44:
NON-QUALIFYING PAYMENTS AND CONTRIBUTIONS Several types of payments and contributions related to higher education do not qualify for the subtraction. The subtraction is not allowed for: payments or contributions made to 529 savings plans established and maintained by other states; rollovers made from one 529 savings plan to another; payments or contributions made to Coverdell educational savings accounts (ESA); or tuition payments. Additionally, any distribution or withdrawal made from a 529 savings account to pay K-12 education expenses is subject to recapture, as discussed below. In order to avoid recapture, taxpayers should not claim a subtraction for any payment or contribution made to a 529 savings account that is expected to be used to pay K-12 education expenses.
None of these situations apply. This is a Colorado 529 I opened shortly after my kids were born, no rollovers are involved and it's not a Coverdell -- it's a 529. And I haven't withdrawn any money from their accounts.
Even if any of those had applied, it would mean I owe money because I got the full refund. The 529 contributions are on the return I submitted from Turbotax, but not on the return on the Colorado website, yet I got the refund from line 36 of the Turbotax form, not the refund from line 36 on the form from the Colorado website. I would think if the state was purposely removing my 529 contributions from the tax return I signed and submitted, there should be some reason and I would be notified that I owe. I doubt they would remove it and allow me to keep the full amount of the refund.