Hi all,
This is my first tax return filing after my D started college. In December, I requested a withdrawal from the 529 to pay my D’s tuition bill directly. The transaction was done on 12/22 and the 529 sent the check to the school the next day. The school received it after the New Year as it is shown on my D’s student account. Now how should I report this on the tax return? I would have the 529 withdrawal in 2014 but the bill is paid in 2015?
Thanks in advance.
You don’t really know when the school received it do you? That’s just when they got around to applying it to the account. You paid in December IMO, you don’t get penalized for the school taking it’s sweet time.
The only thing specific I’ve ever come across in the IRS Pubs about when something is considered paid is in the info concerning medical deductions. I would think the same would apply across the board.
IRS Pub 17, page 143
If you have proof of the date the 529 sent the check you should be fine.
ETA: You should receive a 1099Q for 2014 from the 529 administrator soon and that amount should be included on it.
Your daughter will get a 1098-T from her school reporting tuition paid for 2014. It might be accessible only on-line through the university website so ask her to get it and to email it to you.
The 1098-T will have the billed amount in 2014 if the school uses box 2 but the OP needs to be able to show the amount was paid in 2014 so needs to go by his own records.
The bill was due on 1/7, so it was not late. Would the 1098-T show the billed amount or paid amount? It is not available yet. I think it is kind of like cutting a check myself and mailed it in in December but the check was cashed in January. The only difference is that the check is cut from 529. I have the 529 payment transfer request record. But the school statement is showing the payment in January.
I guess at the end it does not matter. I may still claim the 529 withdrawal was used for paying the student account in 2014 as I have paid even a larger amount from my personal checking. I guess I just need to treat the payment received in January to be from my personal account and claim for tax deductible next year. The only issue is I may not have the $4000 out of pocket for maximal tax credit in 2014.
Your own bank or credit union should be able to verify when the check was processed by the receiver’s financial institution. Ask about that.
billcsho, I don’t think there’s any problem here. You were billed in 2014 and you made the payment in 2014. That’s all that matters. You can’t control when the school credits the payment to the account.
I have never reported 529 withdrawals on my tax return. I keep records of withdrawals and the college invoices. Where on the form are you reporting it?
You should have gotten a 1099-Q from the 529 company. I use tax software so don’t know the forms off the top of my head where they get reported. But it looks like from this page if all is “kosher” (expenses greater than what you took out) you don’t have to report it. But like I said, I use software and let the software deal with it. I-am-not-an-accountant.
http://www.hrblock.com/tax-answers/services/jsp/article.jsp?article_id=64034
mamabear, you don’t report them unless distribtutions exceeded qualified expenses.
The OP just needs to have a record that he did take the distribution and paid the expenses in 2014. The 1099-Q will show he took the distribution in 2014. His online 529 account should show that payment was made in 2014. It doesn’t matter when the school credited the daughter’s account.
billcsho, most schools use box 2 of the 1098-T which is the billed amount. So it doesn’t show when you paid expenses. You need other proof of that should the IRS inquire.
Yes, I know, like I said, I have never reported them on my tax return. I just keep the records of the withdrawals and invoices. I’m on my 3rd kid in college. The OP was asking how to report this on his tax return, and no one mentioned that it does not need to be reported. (I am very old school and don’t use tax software so perhaps if he is using software it gets put in that?)
I took the OP’s statement to be that he just wanted to know for which year should he consider the expenses to have been paid and does he have to consider it an excess withdrawal on his return, which he doesn’t. The expenses were paid in 2014.
Good advice here. I did the exact same thing as the OP. I didn’t think the 529 monies would get to the school as fast as they did and sure enough the 2105 bill was paid in the last days of 2014. I have been searching the internet for what I should do and of course the smart parents on this board have the answer. I am a newbie at handling the college bills…only 1 semester under my belt. 7 glorious semesters left (2 kids) and all of the 529 money is almost gone!
Here is my question to the OP: Did you withdraw money earlier in the year to pay for the fall bill?
@Bundo1921 Yes, I do. I paid 40% of the fall bill with 529 and 60% was covered by scholarships and grant. The winter semester was billed in early December and due in early January, so I can pay it in 2014 or 2015. I intended to pay 34% with cash and 6% with 529 so I have at least $4000 education expenses for tax credit.
I just got a 1099Q. I have been using 529 money for 4 years and this is the first time I was notified that it was reported to the IRS. I withdrew money payable to myself, though it was less than I paid for tuition. So, what do I do now? Report it on my taxes? I paid for tuition out of my checking account.
Will it hurt me on my CSS Profile for D2 and S1 starting college next year?
You should have received a 1099-Q for every tax year in which you made a 529 withdrawal, regardless of who the distribution was paid to. And as far as I know, every 1099-Q has a statement saying that the information is being furnished to the IRS. As long as the 529 distributions for the tax year didn’t exceed the amount of the beneficiary’s adjusted qualified education expenses, you have nothing to report on your taxes. Because you had a 529 distribution in 2014 payable to you instead of the beneficiary, the IRS may ask about the mismatch between SSNs on the 1098-T and the 1099-Q, but it sounds like you shouldn’t have any problem explaining what happened (you reimbursed yourself with 529 funds for QEE that you paid for the beneficiary).
Do you enter the 1099-Q info on your return? Turbo tax has that form as “other income”