How do I deal with 529 payments made in 2020 but received in 2021?

Forum|Forum|5 years ago
March 29, 2021
2 replies
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I made a payment from a 529 plan in Dec 2020, but due to postal delays due to Covid-19, it was received by the university in Jan 2021. As a result, the amount is included in the gross distribution (Box 1) in the 1099-Q from the 529 plan, but is not reflected in the Payments received (Box 1) in the 1098-T from the university. The discrepancy is generating a significant tax liability. Any assistance would be greatly appreciated. Thank you.

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Irene2805

In general, distributions must be taken in the same tax year in which the qualifying expenses are paid.

For the expenses you paid but were not included in the 1098-T, you could enter them in the books, supplies and equipment category. If you include them in your 2020 return, just remember to make the adjustment on the 1098-T you receive for your 2021 return.

quillingAuthor

Thank you Irene2805!

That was most helpful. I'm aware that the distributions should be for the same tax year, but the tuition was due 1/4, and given the significant lead times from the 529 plan, I need to request the payment in the prior year.

Hal_Al

Employee

The fact that the 529 plan shows the money dispersed in 2020 should be enough to satisfy the IRS (if ever needed), even though the school didn't credit the money until 2021.

In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid.

As Irene2805 said, be sure to adjust next year's 1098-T, when you enter it on your 2021 return.