1099-Q Distribution over 2 semesters?

Forum|Forum|2 years ago
April 12, 2023
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We took a distribution from our 529 plan in Aug 2022 to cover for our son's Fall 2022 semester tuition. And we then took another distribution from our 529 plan in late Dec 2022 to cover for his Spring 2023 tuition (since it was due in Jan 1st week). Both these distributions were sent directly to the university. The 2022 1099-Q he received shows both these distributions. However the 2022 1098-T reflects only the Fall 2022 tuition cost effectively showing that the distribution amount was higher than tuition amount for 2022 even though the distribution was 100% paid for the qualified tuition payments.

Should our son have to report the amount difference between 1099-Q vs 1098-T on his 2022 return even though they were full paid for QTP just that the Spring 2023 payment was reported in 1099-Q since we took that distribution in (late) 2022? How can we handle this situation?

Thanks

TurboTax Premier Online

Hal_Al

Employee

Q. Should our son have to report the amount difference between 1099-Q vs 1098-T on his 2022 return even though they were full paid for QTP just that the Spring 2023 payment was reported in 1099-Q since we took that distribution in (late) 2022?

A. Technically, yes. You have a non qualified distribution.

From Pub 970 (page 60: To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses.

Q. How can we handle this situation?

A. See:

https://ttlc.intuit.com/community/college-education/discussion/529-provider-distributed-funds-on-12-30-for-spring-semester-resulting-in-a-mismatch-between-1099q/01/2200938/highlight/false#M41204

https://ttlc.intuit.com/community/college-education/discussion/i-took-a-529-distribution-in-2021-for-a-bill-due-jan-1-2022-is-there-a-way-to-reconcile-the-tax/01/2664891/highlight/false#M46863

https://www.savingforcollege.com/article/timing-of-529-plan-distributions-must-match-qualified-expenses

Try to do a better job on timing in the future.