How do I deal with a recontribution to my daughters 529 account?

Forum|Forum|5 years ago
January 30, 2021
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After paying in full from our daughter's 529 account for fall 2020 tuition, we received a credit back from the school for room and board and some class fees as she went remote for the semester. We followed the steps with her 529 plan and re-contributed the funds back to the account within the 60 day time frame. I now receive the 1099Q form and it shows the full withdrawal before the fund back to the account. What do I do? How do I account for the re-contribution on my taxes? (the funds were sent to the parent to send to the school so I'm listed as the recipient). I have all the paperwork (copies of checks, statements, the forms requesting re-contribution of the school refund etc) to prove the refund, but how do I list that on my taxes when it is not the information showing on the forms? I'm sure I'm not the only parent that received a refund this year! Any help would be appreciated!

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Hal_Al

Employee

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."

So, the 1099-Q is only an informational document. You are not required to enter it. 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. 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 cannot double dip! 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.

That said, the TurboTax (TT) interview handles your situation. After entering the 1099-Q, you will be asked if you got a refund of expenses from the school. Then you will be asked if you recontributed any of it to the plan. TT will treat only the net amount as distribution and the worksheet will provide the details.