mismatch: 1098-T and 1099-Q

[Catherine]

Client took money out of 529 plan in summer for fall tuition, then again in December but paid spring tuition in January.  So 1099-Q shows $18,000 but 1098-T shows $9,000.  How do I present this so the additional $9K does *not* show up as a taxable distribution?

[BHoffman]

What's in box 2 of the 1099Q?

[Catherine]

4 minutes ago, BHoffman said:

What's in box 2 of the 1099Q?

Well it gets worse.  There *is* no total.  Instead it shows all distributions ever made from the umbrella account - for all three kids in the family.  But if looked at by date (again, no total) it adds to $18K but the 1098-T shows $9K paid.

[BHoffman]

1098T forms can show either amounts received or amounts billed.  The financial transcript shows the amount paid by the student, and that is the amount I always use.  I don't think IRS matches these forms since the school has the option of reporting billed or received.  If the $9k is in box 2, then that is the amount billed.  I think the student can use the amount paid.

[BHoffman]

...and it's not good that she paid in 2016.   That said, the IRS does not expect the reporting to match the 1098T.  Schools can choose whether to report amounts billed or amounts received.  Even when they report amounts received, I've never seen form 1098T match the financial transcript.  I've always used the transcript amount.

There must be some way to find out how much of the &18k was earnings.

[Catherine]

38 minutes ago, BHoffman said:

There must be some way to find out how much of the &18k was earnings.

That part I *do* have.

[BHoffman]

How much?  

[grmy2h]

Do you have a transaction history for the student? Even though they only paid 9K, they could still have incurred more than that as QEE. Room and board can be used as QEE for a 529 also.

[Catherine]

Kids live at home (local schools).  

Mom took out funds for two kids and paid for both -- but dad claims one and she claims the other.  What a mess.

[grmy2h]

From Pub 970: "To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses." 

There is no requirement to pay these expenses in the same year - only that the same expenses cannot be used for other education benefits.

(Bolding is mine)

[Catherine]

18 minutes ago, grmy2h said:

From Pub 970: "To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses." 

There is no requirement to pay these expenses in the same year - only that the same expenses cannot be used for other education benefits.

(Bolding is mine)

Thank you!