Bug in TurboTax 2019? AOTC Penalty Exclusion

Forum|Forum|6 years ago
March 15, 2020
1 reply
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I am trying to enter an amount on Line 2e on form 1099Q (Final Section: "Distributions Not Subject to Additional 10% Tax").

Both lines 2c and 2e on this form (in form mode) will NOT allow entry of an 'Add Supporting Details' override. This feature works properly for the other lines in this section (2a, 2b, 2d) which is why I feel this is a Defect in the program.

Entries in this section appear to flow directly to form 5329-T where the 10% penalty is otherwise being calculated. In my case, I'd like to see the amount on 5329T Part 2 Line 5E showing the amount carried forward from the 1099Q Line 2e as a valid AOTC exception for the 10% Penalty (ie "Included only because qualified expenses were taken into account in determining American Opportunity of lifetime learning credit". If you try this, you will see that the amounts entered on 1099Q lines 2a, 2b and 2d correctly flow from 1099Q to 5329-T Part 2 Line 5.

Currently, I am using an OVERRIDE on 5329-T Line 5E to accomplish this.

TurboTax passes checks with this in place so maybe its OK. However, it would be better if the program was corrected if this is in fact a Defect.

Can anyone verify this Bug and/or know how to submit this for consideration?

Is form 1099Q just a 'worksheet' or will that actually be sent to the IRS along with actual forms?

Note: Per my accountant, my tax situation requires filling of the 1099Q (on my daughters form) for 529 distributions in excess of tuition after having claimed the AOTC on my (parent) return (ie to avoid the "Double Dipping" rule). I just can't figure out how to make TurboTax accept the numbers and it seems like a software glitch.

Thank you.

NCPERSON1

can you please post these answers / numbers and maybe i can help you figure it out.... if does take using Forms view

1) whose social security number is on form 1099Q? (your's or your daughter's?)

2) did your daughter earn enough to even file her taxes? (for simplicity did she earn more or less than $12,200 and did she have any withholdings on those earning)?

3) what is in Box 1 and Box 5 on Form 1098T

4) what is in Box 1 and Box 2 on Form 1099Q?

5) what other qualified expenses (room and board, books, computer related expenses) do you have that are NOT reflected on Form 1098T?

ps to answer your question, the information on form 1099Q does NOT get reported to the IRS. It is simply your responsibility to determine if any of Box 2 is taxable - see the first paragraph of the instructions attached to the form 1099Q.

jlarAuthor

Thank you @NCPERSON1

We already hashed out all my numbers ad nauseam in another thread !

I got frustrated and called upon my former accountant and was able to verify the numbers with her also. Unfortunately she is too booked up to help me finish up my taxes until summer so I thought I'd give this one more shot and started over on both mine and my daughters returns.

At this point I'm just trying to figure out how to enter the offset for the 'AOTC Penatly Exemption'. The final section in turboTax 1099Q form appears to be for this...but the 'add supporting details' feature to enter a value manually does NOT work for the line item in question (2e) - a box pops up for entry but when closing the pop-up form the amount is NOT placed on the main 1099Q form (that is a BUG if I've ever seen one!). Some of the other line items in that section do work and the amounts get carried over to the 5329-T (where the results for penalty/offsets are actually calculated).

Since the 1099Q won't allow me to enter a number my solution is to enter the OVERRIDE into 5329-T part 2 Line 5E manually. This achieves the proper tax treatment for my scenario (ie, it nullifies the 'penalty' on 529 distributions caused by the taking of the AOTC on my (parent) return).

SINCE, as you say, the 1099Q form itself does NOT get transmitted to the IRS, I guess it really doesn't matter if this feature works or not.

BUT, it is a DEFECT in TurboTax 2019 and should be rectified. Can I be the only person in the USA who has this situation and is trying to enter a number is this field? Hard to believe that...

@NCPERSON1 - thank you for your reply and for your more detailed help a few weeks ago - you're advice was spot on from day one and I appreciate that you are helping people with this VERY CLUEGY handling of Education Credits in TurboTax 2019.

If you know a better place to make the override to handle the AOTC Penatly Exception please post it here. In the replies from my accountant, she said "Enter this amount on Student Info sheet as AOC exclusion"...I cannot find any such place on the Student Work Sheet to enter such exception information.

By playing around in form mode I found that, in general, the Student Info Sheet will result in entries on the 1099Q...and that entries on the 1099Q in some cases flow directly through to the 5329-T.

At this point I may just have to file and hope for the best.

KrisD15

If the 1099-Q is entered in the same TurboTax program as the Taxpayer that is getting the American Opportunity Tax Credit, the software will know and not compute the penalty interest.

Regardless if the 1099-Q was issued to you or your daughter, you enter the 1099-Q into your TurboTax program so that the software can do the math. (The program will ask who was issued the 1099-Q and you have the option of choosing your dependent listed on your return.)

If any of the distributions are taxable, YOUR program will tell you what to report as "other income" on your daughter's tax return.

You do not need to enter the 1099-Q a second time (on your daughter's return) just the taxable income amount.

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