How to report tuition refund reinvested into 529 w...
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Returning Member

How to report tuition refund reinvested into 529 within 60 days

After paying my daughter's full Fall 2019 tuition from a 529 disbursement in August 2019, in mid-December my child's college received a delayed $3000 scholarship payment and refunded me back that amount of my tuition overpayment (and this scholarship amount is reported on the 1098-T the college sent me). I reinvested the refund back into the 529 within the allowable 60 days, however I received a 1099-Q from the 529 *before* the reinvestment was processed so it reflects an amount $3000 higher. How do I handle this situation in TurboTax so it doesn't calculate a taxable excess of non-qualified 529 disbursements? Do I enter downward-adjusted values on the 1099-Q screen (different from what is on the official form) and if so do I recalculate Earnings and Basis amounts (how?)? Or some other way? Thanks!

6 Replies
Employee Tax Expert

How to report tuition refund reinvested into 529 within 60 days

You are only required to enter the 1099-Q data into TurboTax if you need to report a taxable distribution, and you are entering it to pay that tax

 

In your situation, delete Form 1099-Q from TurboTax and maintain records to support the rollover to the 529 plan with your tax returns for at least (3) years.  That will provide the support that you need in the event of any questions about the rollover. 

 

You can refer to the Instructions to Recipient on Form 1099-Q: "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.

 

Also see: Guide to IRS Form 1099-Q.

 

 

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Returning Member

How to report tuition refund reinvested into 529 within 60 days

Thanks @SusanY1 

It would be nice if the TurboTax Deluxe program made that clearer.  The way "Guide Me" walk-through works currently it seems like entering any 1099-Q is required in all cases.  Maybe next year  ¯\_(ツ)_/¯

Level 2

How to report tuition refund reinvested into 529 within 60 days

Many colleges have closed dorms due to COVID-19 for the balance of the Spring 2020 semester and may be refunding a portion of room and board. If the room/board were billed in 2019 (for Spring 2020) paid with a 529 plan in 2019, but the credit is issued in 2020, how is that handled?  If the money is re-contributed to the 529 plan in 2020, will a new 1099 Q be issued for 2019?  

Employee Tax Expert

How to report tuition refund reinvested into 529 within 60 days

No, the 2019 1099-Q won't be adjusted nor re-issued.

You can recontribute the refunded amount. 

You can still claim the room and board expense towards the distribution, or report that the amount was rolled back into the account. 

According to the IRS:

"If a student receives a refund of qualified education expenses that were treated as paid by a QTP distribution, the student can recontribute these amounts into any QTP for which they are the beneficiary within 60 days after the date of the refund to avoid the need to figure the taxable part of the QTP distribution."

 

"Refunds received after 2019 but before your income tax return is filed. If anyone receives a refund after 2019 of qualified education expenses paid on behalf of a student in 2019 and the refund is paid before you file an income tax return for 2019, the amount of qualified education expenses for 2019 is reduced by the amount of the refund."

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Level 2

How to report tuition refund reinvested into 529 within 60 days

In this situation, what if the refund/recontribution didn't happen until 2020.  Is the recontribution considered a 2019 or 2020 event for 529 record keeping?

Level 15

How to report tuition refund reinvested into 529 within 60 days

Simple answer: 2019.

It's the 2019 Distribution (documented by a 1099-Q) that you need to account for.  But a more general answer is: you need to have a running accounting of the 529 plan for the duration of your student's college years.

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