529 Account distributions and completing tax forms

FerrisH
Thu, 30 Dec 2010 10:48:48 +0000

My $0.02 worth.
For years, I never bothered to report the 1099-Q distributions paid to me (owner of account) for which I used every dime for qualified college expenses for my 3 benneficiary kids…and then this year I got a notice saying I owed thousands on my 2008 taxes for all the distribuions from the Minnesota 529 program. Eventually, the IRS agreed I owed no taxes, but it took two letters with lots of documentation and two phone calls where the wait time was over a half hour each just to get someone who knew nothing and were no help…and in fact, one agent turned out to cause me more trouble. I documented every dime spent, every electronic transfer, etc. Overall, took me about 6-7 hours of work as I had to contact the colleges for detailed billing …about twice the time it takes me do to my taxes with TurboTax…which asked me if I had 1099-Q’s and if I had exspenses and then told me…“you do not need to report”.

This year for 2010 taxes, I am going to document the qualitified expenses and just tack on the 1099-Q as an attachment…and hope that the IRS does not hassle me again for 2009.