End of year 529 disbursement to college

Forum|Forum|6 years ago
April 10, 2020
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Hi. College tuition was due in early January. I initiated the payment from my 529 plan in December. 529 recorded the payment in 2019; however college did not record payment until January 2020. So now I have a large (out of state) disbursement on my 529 in 2019 and yet the 1098-T does not show it. I am trying to make a manual entry for the 1098-T (which turbotax allows) with a note describing what happened and statement that I will adjust 2020 tax return as well. Does anyone know if this will be acceptable to IRS? Note that payment was direct to college and did not pass through my hands.

Thanks, Russ

529 Plan

KathrynG3

It depends. The IRS does not accept taxpayer notes unless included on an official IRS form for correspondence. The Publication 970 as noted below does allow for the expenses of the first three months of the next year to be included in the current year. As long as the distribution matches qualified education expenses in this extended time frame, there is no excess distribution to explain.

See this article for more information Can I include education expenses on my 2019 return that I paid 2018 or earlier?

For more details about education expenses and reporting Form 1098-T, see the articles below:

How do I enter Form 1098-T?
How do I enter Form 1099-Q?
Qualifying education expenses
IRS Publication 970 Tax Benefits for Education, page 40 for Academic period in column one and Prepaid Expenses in column 2.

@sacbut

sacbutAuthor

Great, that is very helpful. Since my college did not include the spring semester tuition on their 2019 1098-T form, do I add that into the 1098-T form in TurboTax, or do I enter somewhere else in TurboTax?

DavidS127

On the same screen where you enter your 2019 Form 1098-T information, click the "What if this is not what (person) paid to this school?" link under box 1 entry for the 1098-T to enter the tuition paid in 2019.

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