I just got my daughter’s 1098-T form and realized the withdrawal I made from her 529 plan on 12/8/2020 was not credited by the school until 1/6/2021. This makes her payments for qualified education programs look higher than what the school shows we paid in 2020, even after I factor in off campus room and board and book expenses. I was really counting on taking the American Opportunity tax credit again this year, and recall there’s a rule that 529 withdrawals in December can be used in the first 3 months of the next year. Which we did. But that 1098T form still doesn’t show what we paid in 2020. Does anyone know if there’s a way to still claim the AOTC in a situation like this?
The AOTC is based on $4,000 maximum. If you have paid at least $4,000 you will get the highest credit you are allowed based on your income. ($2500 is the max.) I believe, though, that since 529 withdrawals are already tax advantaged, that you aren’t supposed to use those amounts for the AOTC. We were advised to pay $4,000 from non tax advantaged account in order to qualify for the credit. Maybe a tax pro can comment for more clarity?
I tihnk the 1098T has a box that can be checked that says the form includes amounts from future or prior semester. I can’t remember the exact wording - does your form have that box checked?
I do see that box, but it’s for if any of the payments included were for January - March of 2021. We have the opposite problem, I guess. I just know we qualify to take the AOTC based on how much I withdrew/paid in 2020, however the college didn’t record our spring semester tuition payment until January 2021 so the tax forms don’t show this. I thought I was giving plenty of time by ordering the 529 check on 12/8, but this was a crazy year.
What’s important in your situation is when you took the 529 distribution and when you paid the expenses that distribution was meant to cover, not when the school credited the payment to your daughter’s account. You can’t be held responsible for a slow college office over the holidays that takes a few extra days (or weeks) to post payments to accounts. If you wrote a check and put it in the mail to the school, the mailing date is your date of payment. If you set up an electronic payment, the date you requested the payment to process is your date of payment. If you asked the 529 administrator to send the distribution directly to the school, the date the 529 administrator did that is your date of payment.
Oh thank god, I’m so relieved to hear that. We had the 529 plan mail it directly and I have a digital record to show the date it was withdrawn in December. Do you know how it works if the 1098-T form doesn’t match what you actually paid in 2020? I can’t remember if you’re allowed to report a different amount paid on taxes from what is shown in the 1098-T.
My best advice is to contact the appropriate finance person at the school and explain that the payment they are attributing to 2021 should have been received by the school in the first half of December. Perhaps they were slow in processing? Are they willing to send you a corrected 1098-T? Actually, you may want to contact the 529 administrator first to confirm that they did what you asked them to do when you expected them to do it. If it turns out they screwed up, then I don’t think you really have any recourse here (except rolling the 529 to a different plan that is hopefully better at what they are supposed to do).
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As a follow up, I contacted both and the 529 plan confirmed it was mailed on 12/9 and the school claims they processed it within 24 hours of receipt, on 1/6. The USPS is slow these days, but that’s really slow. I believe I have a workaround for tax purposes since I can confirm when the money was withdrawn. The lesson here is next time I won’t request a mailed check to the school and will pay it directly online. Live and learn. Thanks again for your advice and help.