One 1098-T and two 1099-Q's one for 2021 and 1 for 2022

[Otter911]

Tuition fees for Fall 21 totaled $20110.00.  R&B totaled $5887.00.  Received a 1098-T for $12750.00.  Liquidated a Coverdell in 8/21 through charles schwab.  Initial contributions were made years ago.  The only amount listed is the Gross Dist ($6635).  There are no amounts listed in the earnings or basis boxes.  TT says there is no taxes to be paid on this since 100% went to qualified expenses.  This is where I think I have a problem though.  Spring '22 bill was due by 1/03/22 and I requested a ditribution ($6322) from our American Funds 529 plan that was paid on 12/29/21.  TT is asking for the basis and earnings amount for this 1099-Q, which it has listed eventhough it is from a 529 rather than a coverdell.  There are asterisks denoting that the info is useful only if the account is a coverdell though.  Bottom line, TT is stating that $2400 of the 529 money is to be taxed.  Is this because I received the distribution in '21 eventhough the money was used for the '22 school year?  Can anything be done to denote that none of the 529 money went to pay for '21 expenses?

[Hal_Al]

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip! 

On form 1099-Q, instructions to the recipient reads: "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." 

Technically, your 529 distribution is  non qualified since the expenses were not paid in the same year as the distribution.  But your situation is common enough that you can probably explain it away, if you receive an IRS notice (unlikely). Especially since the payment was just a few days later.