Regarding K-12 schools and 529 plans.
- What accounting steps are needed. For example, do I need to pay the
private school directly from 529 account? Do I need to withdraw the
money in the same month as the private school tuition is due?
You will have to wait for your 529 plan to update their documents. I just checked the one for VA and they made an update on 02 January 2018:
As we go to print with this latest version of the Invest529 Program Description, Congress has just passed H.R. 1, the Tax Cuts and Jobs
Act. This bill may impact 529 programs and, should it become law, we will publish an update to this document as soon as possible after passage
A key provision will be the phrase in the 529 plan documents:
Eligible Educational Institution is any college, university, vocational school, graduate or professional school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.
So they will have to update this. And they will have to define what is an eligible education institution.
The school itself may have to update their procedures. They might have to produce a 1099-t for tuition so that families using 529 money can show that they had valid education expenses.
Currently for colleges they produce a 1099-T for all students, because it is needed not only for 529 users but also anybody claiming a tax credit.
Under the previous law the money didn't have to be sent directly to the college. The bill could be paid, and then a withdrawal could be made from the 529 plan to the owner or beneficiary. My plan was always to send the money directly to the university, but then in an early semester the school canceled a class for low signups, and then the new class had a lab fee. So the extra money had to come from my bank account and then a request was made from the 529 plan to repay me. The deadline was too tight to make a direct transfer. Now I just plan for last minute changes and wait until a few weeks into the semester to pull the funds from the 529.
2. Do I now need two 529 accounts?
I don't think so. But if you will be withdrawing money sooner than you planned you might need to increase your contributions so you will still have money left for college.
what might happen is that schools offering scholarships for K-12 programs may decide to have parents report 529 plan balances. They may do this because somebody with a large 529 balance can now pay for tuition from the 529 plan. How much they expect a family to pay from the plan when calculating how much tuition they can afford will be interesting to watch.