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Hello,
I have a client who contributed to a 529 plan for years when her son was growing up. She never took money out of the 529 when the son was a dependent and attending undergrad school because the son received a full scholarship for his undergrad. Now the son is in his 30s, married, lives across the country, etc. and attending graduate school (hasn't been a dependent for 10 years). My client (his mom) took out $50,000 from the 529 plan in 2020 to help him pay for graduate school. The 1099-Q is issued to the mom's SSN, the 1098-T was issued to the son's SSN, and the son is no longer a dependent on the mom's return.
Is my client (the mom) stuck with paying tax on the 1099-Q distribution??
Thanks!
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Not if it was used for qualifying education expenses.
The more I know the more I don’t know.
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It was all used for her son's graduate school tuition. Since I am required to report the 1099-Q on my client's return, what are the next steps to ensure that she doesn't pay tax on that 529 distribution?
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The software should have a place to enter the amount of the distribution spent on qualifying expenses.
The more I know the more I don’t know.
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I am not aware of any place to enter education expenses other than by creating a Form 1098-T, which wouldn't apply for her situation since her son received the Form 1098-T (assigned to the son's SSN) and he is not a dependent. Do you use ProSeries? Would you be able to tell me which area you are referring to?
Thanks!
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I do not use ProSeries so can't help there.
The more I know the more I don’t know.
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Use "where to enter 1099-Q". There is a worksheet that will take you thru this. I had one of these this year. Can't remember exactly but I know it is there.
