College refund

[confusedrf]

It's funny I got my TurboTax home and business today and when I got home I had something a little unexpected... a refund or credit for my daughter's college... it mentioned some sort of Grant or whatnot but my daughter was expecting it ... I said her classmates were getting checks today..she says for  covid and related expenses...

Some background, she is in her fourth year and her tuition was paid from her 529 account. She received 2700 back today.  I'm curious how this will get reported. I'm also concerned because 529s are allowed to grow tax-free and I believe if you overdraw you have to pay a tax penalty of some sort. However is there a way to get this money back into the 529 account? I'm not sure why they sent her a check instead of crediting it from where it came from... FYI we still have a little money in the 529 account that I was planning on allowing her to use towards her master's degree.

She does file her own tax return her 1099 t and q are reported on our, her parents, income tax. Where will this be reported?

Anyone ever run into this before and what can I expect and or what can I do if I have any options?

[MarilynG1]

If your 529 distribution was used for Qualified Education Expenses, you don't have to enter the 1099-Q  in your return.

If the 1098-T qualifies you for an Education Credit (less expenses used against 529 distribution), enter it in your return.  If not, you don't need to enter it either.  Your daughter could enter it in her return, if she is required to file a return. 

There are a couple kinds of refunds your daughter may have received.  Since students weren't initially eligible for Stimulus payments, if your daughter filed her own return for 2020, she may be getting that payment.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) establishes two emergency financial aid grant programs for students. One involves unexpended Federal Work-Study (FWS) and Federal Supplemental Educational Opportunity Grant (FSEOG) funds. The other involves a new Higher Education Emergency Relief Fund (HEERF), at least half of which must be used for emergency financial aid grants to students.

Neither the Grant funds or Stimulus payments are taxable. 

Click this link for more info on Coronavirus Relief for Students. 

[confusedrf]

Yes I have entered the q&t on my and my wife's tax return and we've gotten a credit/refund on that each year.

I believe somewhere in the check and literature it mentioned heerf so perhaps this is good news and I have nothing to worry about!

Hoping to break open my TT  CD and get started this weekend.

Thanks!

[confusedrf]

Just doing my taxes...so this (HEERF) check my daughter got from the school...essentially that is ours to put towards.... whatever we want?   It does not impact what I withdrew from the 529 plan against tuition for the year? It felt like I a school refund on tuition...meaning I overdrew the 529....but I had to pay the school's bill when I got it...I did not know months later I would get this. It doesn't get entered anywhere in TT?

[ErnieS0]

Your daughter may have received a CARES Act: Higher Education Emergency Relief Fund grant. These amounts are not taxable. They are for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic.

For more info see: FAQs: Higher Education Emergency Relief Fund and Emergency Financial Aid Grants under the CARES Act