529 withdraws were less than our Qualified Education Expenses. Going through the TurboTax Interview, it says that we owe no taxes for this reason. But the printed worksheets have $5,000 in reimbursements "taxable to the recipient". What gives? No 5329 was generated by TT. The whole 529/QEE interview process is a bit clumsy.
This could be possible. I assume you have a 1098-T. Does the 1098-T have information in Box 5? If so, the amount in Box 1 will be reduced by the amount in Box 5 (Scholarships/Grants). If the difference between Box 1 and 5 is less than the amount of the 529 withdrawal then that amount becomes taxable. Basically, if the difference between Box 1 and Box 5 of 1098-T and ten take into consideration the 529 disbursement comes out with an excess amount, that is the amount is taxable. My guess is if the worksheet is showing $5,000 in taxable income, then there must have been an amount in Box 5 of the 1098-T and between Box 1 and Box 5 of the 1098-T and the 529 distribution results in the income of $5,000.
Only a Box 1 amount. No scholarships, loans, or loan payments.
Look at Schedule 3 to Form 1040. Is there an amount on Line 3? If so, this is the amount of Education Credit. If not, check Line 8z of Schedule 1. Is there an amount on this line? What is on this line, does this have the $5,000. If so, then you are being taxed on the $5,000.
One thing you could try is to delete the entries for the 529 and the 1098-T and then re-enter the information to see if it clears this up?
Since I cannot see the forms, I cannot give you much more than checking these areas to see if they can give you any explanation.
Nothing on either of those lines. We withdrew from two 529s, so what may be happening is that TT doesn't know how to distribute the QEE between the two 1099-Qs. No 5329 and nothing on those lines, so perhaps it is indeed a Worksheet glitch and not a taxable entry. I will sleuth it a bit more.
As long as it is not showing on the actual return on Line 8z of Schedule 1 then you are not being taxed on the $5,000.