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Financial Planning / Tax Strategies
|Subject: Reporting 529 distributions on taxes||Date: 3/19/2008 8:42 PM|
|Author: TMFTaurean||Number: 99590 of 120806|
(Originally posted over on the Paying For College board, and it was suggested that I cross post here, so here I am... :-)
We're going through the process of filing our taxes for the first time since our daughter entered college and having trouble on how to properly report 529 distributions. Here's our situation
- Daughter finishing up freshman year at college.
- Wife has had a 529 plan set up for while, which we contribute to regularly
- Daughter is named as beneficiary on the 529
- We are the non-custodial parents and do not claim her on taxes
- Took a small distribution from the 529 this year which was applied to tuition.
- When wife requested distribution, the check came to her, made out in her name which we then cashed and used to pay tuition
- Received a 1099-Q from 529 for distribution
We use Turbo Tax to prepare our taxes and while I somehow stumbled through the program and managed to get the 1099-Q data entered, it wants to treat is as a taxable event, with penalty for non-education withdrawal. I think the ultimate issue is that we're not able to claim DD as a depenedant, so I'm not able to tell TurboTax that the distribution was used to pay college expenses for our daughter.
So, I guess my questions are two-fold
- How to I properly account for all of this on this year's taxes?
- What is the best approach to managing the withdrawals from the 529 plan in the remaining years to make reporting the distributions as straightforward as possible?
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