<p>Ready to take our first 529 distribution and need advice about whether check should go to account owner or the beneficiary (too late to pay directly to university and don't want to use that option anyway). Have excluded $4000 of tuition paid to preserve AOTC and our qualified expenses will definitely exceed the amount of the distribution. </p>
<p>I have read that the check should be issued to the beneficiary (and then they would in turn sign it over to us) so that the 1099-Q in in the student's names and the IRS does not flag us and make us send in paperwork to document the expenses. Just wondering why the IRS wouldn't instead flag the student and make him prove things - which would seem to be harder since we were the ones that actually paid the expenses.</p>
<p>Any input from those that know the ropes? TIA!</p>
<p>We have done it the other way (to the account owner). While I have (some years, not all for some reason) had to respond to a query from the IRS, it was very easily satisfied with a quick letter and copies of the tuition bills. No audit, no big deal for me. You can go either way. The IRS question isn’t a problem if you kept your documentation, they just want to know for sure that you had expenses in the year you took the disbursement. Note: I make sure my check is cashed in the same year for the expenses as for the disbursement just to avoid any issues. So I pay tuition immediately when the bill near the end of the year is received so they cash it before going out on winter break. I take the disbursement before getting the bill to do this. Not sure this is necessary, but it has worked out for us (on kid #2 now).</p>
<p>Only comment would be that if you have the funds go directly from the 529 Plan to the University (even though OP says they do not want to do that), it appears you do not then get the IRS inquiries that intparent is referring to above.</p>