TT not calculating 529 excess withdrawals correctl...
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gtd1234
Level 2

TT not calculating 529 excess withdrawals correctly

I own a 529 plan which I am using to pay for my son’s college expenses.  I worked through the TT educational expenses section using the interview to input all the info from the 1098-T and 1099-Q.  I made two excess distributions, one to account for a scholarship he received (for which the earnings should be taxed, but no 10% penalty applied) and one in which I paid more for his off-campus rent than allowed by the college’s Cost of Attendance (for which the earnings should be taxed and the 10% penalty applied).  We receive no educational credits.  In part VIII, line 4 of the Student info worksheet, for both columns TT (Deluxe, download) is not calculating the excess distribution amount correctly; it is too low.  Suggestions appreciated.

5 Replies
Hal_Al
Level 15

TT not calculating 529 excess withdrawals correctly

 

Suggestion: Since you're familiar with the student info worksheet, make your adjustments there (line 3, section VIII). 

gtd1234
Level 2

TT not calculating 529 excess withdrawals correctly

Thank you.  By omitting some info from the 1098-T I was able to get the right amounts to show in Part VIII (student info wk) in the "For purposes of regular tax" column.  However, none of the entries in the "For the purposes of 10% additional tax" column can be changed.  So, I am now correctly paying tax on the excess distribution, but not the 10% extra tax on some of it.  Same situation on the 1099-Q worksheet.  Any additional advice would be welcome. 

ReneeM7122
Level 4

TT not calculating 529 excess withdrawals correctly

It sounds like there may be an issue with one of the questions in the interview.  You should not have to omit information on the 1098-T or 1099-Q because the data should match the IRS.  It may be your best option to remove the form(s) manually and start again.  Here are the instructions:

 

How do I view and delete forms in TurboTax Online?

  • Open or continue your return in TurboTax.
  • In the left menu, select Tax Tools and then Tools.
  • In the pop-up window Tool Center, choose Delete a form.
  • Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

 

Hal_Al
Level 15

TT not calculating 529 excess withdrawals correctly

Provide the following info for more specific help:

  • Are you the student or parent.
  • Is the  student  the parent's dependent.
  • Box 1 of the 1098-T
  • box 5 of the 1098-T
  • Any other scholarships not shown in box 5
  • Does box 5 include any of the 529/ESA plan payments (it should not)
  • Is any of the Scholarship restricted; i.e. it must be used for tuition
  • Box 1 of the 1099-Q
  • Box 2 of the 1098-Q
  • Who’s name and SS# are on the 1099-Q, parent or student (who’s the “recipient”)?
  • Room & board paid. If student lives off campus, what is school's R&B charge
  • Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
  • How much taxable income does the student have, from what sources
  • Why are you not claiming the education credit?
Hal_Al
Level 15

TT not calculating 529 excess withdrawals correctly

One possibility is that TurboTax allocated part of your dependent's college expenses to claim the Tuition credit, even if you are not eligible or otherwise did not claim it. That reduces the amount that can be used to claim the  529 earnings, shown on the 1099-Q, as being totally tax free. Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary".  Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use (0 in your case) or change it.  You may reach that screen sooner.

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