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McC2incollege
Returning Member

529 vs tuition --is the 1098T wrong??

We use the 529 to pay all of our kids' college expenses.  One school wants tuition paid way ahead of time (usually sent end of December and credited beginning of January) and then the 1099Q shows a mismatch with the 1098T.  Thus it *looks* like he took a huge distribution and did not use it all for education.  Then TT says he has to file taxes, which he doesn't.  How do I fix this?  All our distributions go straight to the school but the 1099Q says it went to him since he is the beneficiary. None of this money was ever in his hands. His only pay is his small part time job.

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1 Reply
KrisD15
Expert Alumni

529 vs tuition --is the 1098T wrong??

Use the student's school account statement to match the expenses and distributions. Don't forget about room and board and books and supplies not shown on the 1098-T.

 

If the distributions were all used for education expense, and there were no excess expenses to use for an education credit, do not enter 1099-Q or 1098-T. 

 

According to the IRS:

“Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return.”

 

If there was excess expenses and you are applying for a credit, you can alter the 1098-T input through the interview to claim only the expenses not paid for by a distribution or scholarship. 

 

Be aware that if you enter into TurboTax and select "Maximize My Credit" the program may suggest the student claim taxable scholarship or distribution if this gives you a credit since the student's tax will be less than your credit. In this situation, it might be better to have the student claim distribution rather than scholarships. 

 

IRS Pub 970 explains more 

 

 

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