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Discussion:1099-Q Excess Distribution

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Discussion Forum Index --> Basic Tax Questions --> 1099-Q Excess Distribution


Discussion Forum Index --> Tax Questions --> 1099-Q Excess Distribution

Martinea (talk|edits) said:

19 March 2014
Taxpayer withdrew all 529 plan money and set up a school account for his daughter. They are tracking every penny for school expenses. However taxpayer was misinformed and thought that he could manage the money. Amount taken out was 27,000 - only 2,000 used for school in 2013. Student is going to junior college.
Is a rollover / put back / do over available for taxpayer?  

I told them he was on the hook to claim as taxable income the earnings over the proportionate amount used for school in 2013. ($5,200 plus $520 penalty.)

Taxmonkey (talk|edits) said:

19 March 2014
60 days for a rollover. Don't forget to include "room and board" in qualified education expenses.

Martinea (talk|edits) said:

20 March 2014
Been more than 60 days.

In taxpayers defense - I read the paper work / brochure he was given. No where does it state that disbursements must be matched up to educational expenses each calendar year. It just says all disbursements must be used for education.

He promises he will only use this account for her education.

Martinea (talk|edits) said:

20 March 2014
Spoke with the investment company.

Investment company states that the tax code does not state that the amount withdrawn has to be spent on education in the year of disbursement. Implies the withdrawal could be held over for a future year.

Nilodop (talk|edits) said:

20 March 2014
Discussion:529 distribution for 2 years expenses

Riki EA (talk|edits) said:

20 March 2014
I wouldn't recommend taking tax advice from the investment company. 1099-Q distributions have to be used for education expenses in the same calendar year as the withdrawal to avoid taxation and the 10% penalty.

Ckenefick (talk|edits) said:

20 March 2014
in the same calendar year as the withdrawal

Actually, there's no guidance on that issue...IRS has said they'll issue regs, and they haven't.

Investment company states that the tax code does not state that the amount withdrawn has to be spent on education in the year of disbursement. Implies the withdrawal could be held over for a future year.

I agree.

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