Our oldest kid started college this fall. We have a 529 plan with her as the beneficiary. We took $9400 out of the account this fall to pay for her tuition.
There isn't anything to tax because the qualified expenses (shown on a 1098-T from the college) are far more than $9400. When we took the money out of the 529 plan, rather than having the money disbursed straight from the 529 plan to the college, we had the funds sent to our bank account, and then we paid the tuition from there.
We got a 1099-Q from the plan showing a gross distribution of $9400 in box 1. But box 6 of the 1099 is also checked, showing that the recipient of the distribution (me) is not the designated beneficiary (my daughter).
I am filling out 2017 taxes, and I just read that what I did wasn’t the best idea: the IRS computers are apt to send out deficiency notices assessing tax, interest, and penalty, even when you know with certainty that the withdrawals were tax-free based on your beneficiary’s qualifying college expenses.
So is there anything I can do when filling out taxes that shows the distribution should not be taxed? Is there somewhere to report the 1099-Q distribution amount and show it’s less than the qualifying expenses?