TT treats trustee to trustee rollovers from 529 to ABLE account (same beneficiary) as taxable. 1099-Q says I (parent) am recipient. How to fix this nontaxable event?

Forum|Forum|2 years ago
February 10, 2024
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Rollover was accomplished within 60 days. I am account owner of 529 and authorized person on ABLE account. TT reports the earnings are taxed. All the funds withdrawn ($17k) from the 529 were deposited into the ABLE account.

TurboTax Online

Best answer by KrisD15

If the rollover is non-taxable, don't enter the 1099-Q.

According to the IRS Pub 907

"Contribution limitation. The total annual contributions to an ABLE account (including amounts rolled over from a section 529 account, but not other amounts received in rollovers and/or program-to-program transfers between ABLE accounts) are limited to the annual gift tax exclusion amount ($17,000 for 2023),..."

According to the IRS Pub 970

"An amount is rolled over if it's paid to an ABLE account or another QTP within 60 days after the date of the distribution.

Don't report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040, 1040-SR, or 1040-NR. These aren't taxable distributions."

BillM223

There are a number of questions.

First, did you see this Learn More box?

On the screens in the 1099-Q:

line 4 - did you check the rollover box on the 1099-Q?

On the screen "Distribution Transfer", did you answer YES that the amount was rolled over within 60 days?

Who was the new beneficiary?

On the screen "Rollover", did you answer YES?

Let's get these answers and see what we have.

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taxhelpmenowAuthor

I saw the "Learn More" box.

I checked the line 4 trustee-to trustee rollover box.

I answered 'yes' the distribution was rolled over within 60 days.

I answered the new account beneficiary is the original beneficiary.

I answered 'no' to the rollover within 12 months prior screen.

On the next rollover screen I answered that "NONE" of the distribution was rolled into another QTP. That's where the problem is: the screen doesn't provide a checkbox for rolling into an ABLE account.

taxhelpmenowAuthor

On a related note:

I received the 5498-QA and realize it does not have to be entered into Turbotax. But I went down the rabbit hole of excess contributions before reaching that conclusion.

On the TT page "Excess ABLE Account Contribution" it says "If more than $15,000 was contributed . . . in 2023, enter the amount of excess contribution . . . "

According to IRS Pub 907 "For 2023, the maximum amount that can be contributed to your ABLE account is $17,000. Certain employed ABLE account beneficiaries may contribute a limited additional amount. . . . "

So the 2023 threshold for excess contributions is $17,000 (+ certain income), not $15,000, yes?

NC27519

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