Refunds for Spring 2020

Forum|Forum|5 years ago
June 21, 2020
1 reply
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Hi - I am a parent who paid for tuition and fees in December 2019 for Spring 2020 and used my child's 529 plan funds in 2019 for the tuition and fees. A refund was sent to my daughter in April for a small amount of the fees that were paid, and she deposited the check. Since I did not redeposit it in her 529 plan, can I just reduce the amount I will withdraw in 2020 for 2020 tuition/fees by the amount of the refund? It achieves the same effect I think? I was not aware of the need to put the money back in the plan but I have seen mention of this in Kiplinger and elsewhere so I wanted to ask.

Carl11_2

Employee

If the refund was paid to your daughter (not you or anyone else) then it counts as part of your daughter's income. Period. End of story.

Since this refund was in 2020 it does note make one single penny of difference to anyone's 2019 tax return. Now for the 2020 tax season (which you will not deal with until 2021) including the amount of that refund, if your daughter's total reportable income is less than $12,300 then she doesn't even need to file a tax return at all. (one exception covered below.) Reportable income would include:

- Earned income reported on a W-2

- Self employment income paid to her in cash in 2019, or reported to her on a 1099-MISC

- Refund of any monies paid to the college for any reason at any time. This would include any excess scholarship, grant, or 529 distributions.

A tax return is required to be filed if:

-Self employment income received is more than $400

- The total of all reportable income from all sources (including self-employment) is more than $12,300

Now if the student's income does not exceed those thresholds, the only reason the student would need to file a tax return would be if any taxes were withheld from their W-2 pay. They would do this for the sole purpose of getting those withheld taxes refunded to them.