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529 withdrawal process
I’ve 529 plan at Vanguard for my son. I might want to withdraw from it from subsequent yr.
What’s the course of @ Vanguard? If I specify a university and their charges, would Vanguard switch the cash to them immediately or is there extra concerned?
I wish to ensure that I do know all the small print when the time comes in order that it may be executed with minimal ache.
Thanks,
ssn
Re: 529 withdrawal process
If the college can obtain 529 cash, that will be the way in which to go.
In our case, sending cash to our child turned out to be higher than sending to us, since tax submitting includes explaining the transaction is just not revenue for us. It’s higher to your child to have a checking account to obtain the cash by way of ACH than by way of test within the mail.
Re: 529 withdrawal process
xzhou wrote: ↑Tue Aug 20, 2024 3:10 pm
If the college can obtain 529 cash, that will be the way in which to go.
In our case, sending cash to our child turned out to be higher than sending to us, since tax submitting includes explaining the transaction is just not revenue for us. It’s higher to your child to have a checking account to obtain the cash by way of ACH than by way of test within the mail.
If the bills are certified, nothing goes in your taxes in any respect with a 529 withdrawal.
Re: 529 withdrawal process
I all the time simply had the 529 switch the funds to my account. I did this a few times a yr. Generally it was reimbursing bills I already paid and typically getting the cash forward of time for upcoming payments that yr. I choose controlling when the payments are paid and making certain that they’re.
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Re: 529 withdrawal process
cshell2 wrote: ↑Tue Aug 20, 2024 3:20 pmxzhou wrote: ↑Tue Aug 20, 2024 3:10 pm
If the college can obtain 529 cash, that will be the way in which to go.
In our case, sending cash to our child turned out to be higher than sending to us, since tax submitting includes explaining the transaction is just not revenue for us. It’s higher to your child to have a checking account to obtain the cash by way of ACH than by way of test within the mail.If the bills are certified, nothing goes in your taxes in any respect with a 529 withdrawal.
Appropriate. I have no idea what xzhou is referring to?
You may withdraw from a 529 in quite a lot of methods.
I’ve been doing it for six years and have all the time discovered it finest for me to withdraw the cash from the 529 and into my linked checking account. When it arrives, I ship it electronically to the college. That is permitted and doesn’t require any rationalization in my tax submitting.
Re: 529 withdrawal process
SchruteB&B wrote: ↑Tue Aug 20, 2024 3:37 pm
…You may withdraw from a 529 in quite a lot of methods.
I’ve been doing it for six years and have all the time discovered it finest for me to withdraw the cash from the 529 and into my linked checking account. When it arrives, I ship it electronically to the college. That is permitted and doesn’t require any rationalization in my tax submitting.
My child’s 529 plan is just not at Vanguard, however I exploit the identical course of as above:
1. Switch the funds by way of ACH from the 529 plan to my linked checking account.
2. Pay tuition, charges room and board by way of the faculty’s cost portal from my checking account.
3. Preserve copies of the statements/receipts, each from the college and from the 529 plan.
As above, so long as the bills are certified, there is no such thing as a taxable revenue or penalty.
Additionally search for the faculty’s “Price of Attendance”, notably the housing and meals class – in case your son goes to reside off-campus, you may solely draw as much as that quantity with out penalty.
Listed below are some articles:
“Ritter, Tod und Teufel”
Re: 529 withdrawal process
Cost is by way of a mailed bodily test until you specify an digital switch. The digital switch choice carries an additional price.
Re: 529 withdrawal process
Thanks very a lot to your replies. The method appears pretty simple.
ssn
Re: 529 withdrawal process
SchruteB&B wrote: ↑Tue Aug 20, 2024 3:37 pmcshell2 wrote: ↑Tue Aug 20, 2024 3:20 pmxzhou wrote: ↑Tue Aug 20, 2024 3:10 pm
If the college can obtain 529 cash, that will be the way in which to go.
In our case, sending cash to our child turned out to be higher than sending to us, since tax submitting includes explaining the transaction is just not revenue for us. It’s higher to your child to have a checking account to obtain the cash by way of ACH than by way of test within the mail.If the bills are certified, nothing goes in your taxes in any respect with a 529 withdrawal.
Appropriate. I have no idea what xzhou is referring to?
You may withdraw from a 529 in quite a lot of methods.
I’ve been doing it for six years and have all the time discovered it finest for me to withdraw the cash from the 529 and into my linked checking account. When it arrives, I ship it electronically to the college. That is permitted and doesn’t require any rationalization in my tax submitting.
I agree with xzhou, that the taxes are loads easier when you distribute the cost on to the college. Second finest can be to distribute on to the scholar. Should you distribute to your self, Vanguard will ship you a 1099-Q. TurboTax, to call one program, goes to ask you to enter the 1099-Q and it’ll deal with this distribution as revenue until you additionally individually enter eligible bills on this quantity and punctiliously observe that your baby is a full-time scholar, and so on. The foundations for eligible bills for 529 distributions are usually not the identical as deductible instructional bills, and that may additionally chunk you. TurboTax is just not nice at cautioning you the distribution is being taxed.
One different factor that journeys up lots of people is when the spring tuition comes due. To organize, folks take a 529 distribution to their checking account in December. Then they pay the invoice when it’s due in January. So they have a distribution within the prior yr with no instructional expense paid in that yr. That makes the distribution taxable.
Briefly, there there are many methods to unintentionally make a minor a mistake in timing distributions or submitting your taxes that trigger your 529 distribution to finish up being taxable. In my years of expertise doing this, I’ve discovered it a lot simpler to keep away from the complication and distribute on to the college.
Re: 529 withdrawal process
MoreTaxes wrote: ↑Tue Aug 20, 2024 5:07 pm
I agree with xzhou, that the taxes are loads easier when you distribute the cost on to the college. Second finest can be to distribute on to the scholar. Should you distribute to your self, Vanguard will ship you a 1099-Q. TurboTax, to call one program, goes to ask you to enter the 1099-Q and it’ll deal with this distribution as revenue until you additionally individually enter eligible bills on this quantity and punctiliously observe that your baby is a full-time scholar, and so on.
The only factor to do is to disregard all 529 questions in TurboTax, which in my expertise screws issues up and wishes numerous guide corrections. So long as your entire distributions are certified and beneath the printed COA, I feel you may simply skip it in TurboTax.
Re: 529 withdrawal process
SchruteB&B wrote: ↑Tue Aug 20, 2024 3:37 pmcshell2 wrote: ↑Tue Aug 20, 2024 3:20 pmxzhou wrote: ↑Tue Aug 20, 2024 3:10 pm
If the college can obtain 529 cash, that will be the way in which to go.
In our case, sending cash to our child turned out to be higher than sending to us, since tax submitting includes explaining the transaction is just not revenue for us. It’s higher to your child to have a checking account to obtain the cash by way of ACH than by way of test within the mail.If the bills are certified, nothing goes in your taxes in any respect with a 529 withdrawal.
Appropriate. I have no idea what xzhou is referring to?
I believe it was associated to withdrawing 529 cash to offset any scholarships obtained. My son has no earned revenue, so I withdrew the $1600 semester scholarship he obtained in his title because it’s taxable (however no penalty).
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Re: 529 withdrawal process
Zipster wrote: ↑Tue Aug 20, 2024 5:31 pmMoreTaxes wrote: ↑Tue Aug 20, 2024 5:07 pm
I agree with xzhou, that the taxes are loads easier when you distribute the cost on to the college. Second finest can be to distribute on to the scholar. Should you distribute to your self, Vanguard will ship you a 1099-Q. TurboTax, to call one program, goes to ask you to enter the 1099-Q and it’ll deal with this distribution as revenue until you additionally individually enter eligible bills on this quantity and punctiliously observe that your baby is a full-time scholar, and so on.The only factor to do is to disregard all 529 questions in TurboTax, which in my expertise screws issues up and wishes numerous guide corrections. So long as your entire distributions are certified and beneath the printed COA, I feel you may simply skip it in TurboTax.
Agreed. Take the cash how ever it’s most handy to you. Should you aren’t eligible for AOTC and all withdraws are certified there’s NO purpose to enter something into turbotax.
Certified 529 withdrawals do not must be reported. Save all receipts/payments in case of audit. Simple-peasy.
Coming into this in Turbotax needlessly is like including up and getting into all you medical bills though you understand it is not sufficient to be deductible- it is a waste of time.
Re: 529 withdrawal process
Zipster wrote: ↑Tue Aug 20, 2024 5:31 pmMoreTaxes wrote: ↑Tue Aug 20, 2024 5:07 pm
I agree with xzhou, that the taxes are loads easier when you distribute the cost on to the college. Second finest can be to distribute on to the scholar. Should you distribute to your self, Vanguard will ship you a 1099-Q. TurboTax, to call one program, goes to ask you to enter the 1099-Q and it’ll deal with this distribution as revenue until you additionally individually enter eligible bills on this quantity and punctiliously observe that your baby is a full-time scholar, and so on.The only factor to do is to disregard all 529 questions in TurboTax, which in my expertise screws issues up and wishes numerous guide corrections. So long as your entire distributions are certified and beneath the printed COA, I feel you may simply skip it in TurboTax.
Thanks, MoreTaxes, to your care and energy. We bought a CP2000 asking concerning the distribution. After rounds of letters forwards and backwards, IRS agreed that we didn’t owe any taxes. However boy was {that a} problem. Subsequently we’re nowhere as courageous as Zipster now.
Comparable scenario was reported in viewtopic.php?t=420911
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Re: 529 withdrawal process
xzhou wrote: ↑Tue Aug 20, 2024 8:47 pmZipster wrote: ↑Tue Aug 20, 2024 5:31 pmMoreTaxes wrote: ↑Tue Aug 20, 2024 5:07 pm
I agree with xzhou, that the taxes are loads easier when you distribute the cost on to the college. Second finest can be to distribute on to the scholar. Should you distribute to your self, Vanguard will ship you a 1099-Q. TurboTax, to call one program, goes to ask you to enter the 1099-Q and it’ll deal with this distribution as revenue until you additionally individually enter eligible bills on this quantity and punctiliously observe that your baby is a full-time scholar, and so on.The only factor to do is to disregard all 529 questions in TurboTax, which in my expertise screws issues up and wishes numerous guide corrections. So long as your entire distributions are certified and beneath the printed COA, I feel you may simply skip it in TurboTax.
Thanks, MoreTaxes, to your care and energy. We bought a CP2000 asking concerning the distribution. After rounds of letters forwards and backwards, IRS agreed that we didn’t owe any taxes. However boy was {that a} problem. Subsequently we’re nowhere as courageous as Zipster now.
Comparable scenario was reported in viewtopic.php?t=420911
The referenced submit additionally was somebody that unnecessarily filed 1099-Q and 529 expense data into turbo-tax so I do marvel if these which might be getting CP2000’s are solely these which might be unnecessarily submitting data that’s inflicting the question.
You are not required to report certified 529 withdrawls. Doing so will increase your probabilities of making an error and will increase the IRSs probabilities of getting confused and sending a question.
Re: 529 withdrawal process
we’ve vanguard for 529 it is rather simple to pay the faculty immediately they’ve drop down menu on the web site to search out his school and I simply want his school id quantity. It takes about 3 days to indicate up on the school and mirror in my assertion. HTH
Re: 529 withdrawal process
Hillview wrote: ↑Tue Aug 20, 2024 9:23 pm
we’ve vanguard for 529 it is rather simple to pay the faculty immediately they’ve drop down menu on the web site to search out his school and I simply want his school id quantity. It takes about 3 days to indicate up on the school and mirror in my assertion. HTH
I agree, I discover it simpler to pay the college immediately from a drop down menu than to take a distribution to my checking account and individually pay the college in one other transaction. It does not make sense to me to do in two transactions what might be executed with one. And that is not even contemplating the tax situation.
These not getting into your entire 1099’s, effectively, I’ll simply say I do not take that method. The December/January situation is actual, and people making the December/January mistake after which not getting into the 1099-Q would by no means understand that they’re dishonest on their taxes till they get the letter from the IRS. Additionally, no guide fixes are wanted in TurboTax to file the 1099-Q accurately and I’d discover that will be a harmful recreation to play.
I am not judging, simply saying, every particular person can resolve on the appropriate method for themselves.
Re: 529 withdrawal process
SmileyFace wrote: ↑Tue Aug 20, 2024 9:10 pmThe referenced submit additionally was somebody that unnecessarily filed 1099-Q and 529 expense data into turbo-tax so I do marvel if these which might be getting CP2000’s are solely these which might be unnecessarily submitting data that’s inflicting the question.
The referenced submit was from somebody who obtained a letter from the IRS saying that the 1099s had been not included of their return. The IRS will get a direct copy of your entire 1099s, and which may be the seemingly supply of the IRS letter.
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Re: 529 withdrawal process
MoreTaxes wrote: ↑Thu Aug 22, 2024 1:11 amSmileyFace wrote: ↑Tue Aug 20, 2024 9:10 pmThe referenced submit additionally was somebody that unnecessarily filed 1099-Q and 529 expense data into turbo-tax so I do marvel if these which might be getting CP2000’s are solely these which might be unnecessarily submitting data that’s inflicting the question.
The referenced submit was from somebody who obtained a letter from the IRS saying that the 1099s had been not included of their return. The IRS will get a direct copy of your entire 1099s, and which may be the seemingly supply of the IRS letter.
Unclear if the OP filed the 1099s or not BUT The OP references filling out worksheets for school bills. Why did they try this? There is no such thing as a want if all bills had been certified. Submitting further/pointless information with the IRS relating to school is what may have set off the inquiry.
My statement is that those who have gotten these inquiries are submitting school expense information – over 11 years of my youngsters going through school I by no means filed such information and by no means bought an inquiry and have not seen people report right here getting an inquiry besides these getting into pointless information.
TT will ask you to enter all expense information when you enter your 1099Q – so that’s one purpose folks could also be filling out the bills information.
Re: 529 withdrawal process
SmileyFace wrote: ↑Thu Aug 22, 2024 5:20 amMoreTaxes wrote: ↑Thu Aug 22, 2024 1:11 amSmileyFace wrote: ↑Tue Aug 20, 2024 9:10 pmThe referenced submit additionally was somebody that unnecessarily filed 1099-Q and 529 expense data into turbo-tax so I do marvel if these which might be getting CP2000’s are solely these which might be unnecessarily submitting data that’s inflicting the question.
The referenced submit was from somebody who obtained a letter from the IRS saying that the 1099s had been not included of their return. The IRS will get a direct copy of your entire 1099s, and which may be the seemingly supply of the IRS letter.
Unclear if the OP filed the 1099s or not BUT The OP references filling out worksheets for school bills. Why did they try this? There is no such thing as a want if all bills had been certified. Submitting further/pointless information with the IRS relating to school is what may have set off the inquiry.
My statement is that those who have gotten these inquiries are submitting school expense information – over 11 years of my youngsters going through school I by no means filed such information and by no means bought an inquiry and have not seen people report right here getting an inquiry besides these getting into pointless information.
TT will ask you to enter all expense information when you enter your 1099Q – so that’s one purpose folks could also be filling out the bills information.
The poster made clear that the 1099s weren’t filed, as they are saying within the first sentence of their submit:
“We obtained a dreaded CP2000 letter yesterday from the IRS ‘proposing’ a big cost from us with respect to our 2022 return based mostly on 4 1099s that the IRS mentioned weren’t included on our return.”
Worksheets are usually not despatched to the IRS both.
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Re: 529 withdrawal process
MoreTaxes wrote: ↑Thu Aug 22, 2024 1:28 pmSmileyFace wrote: ↑Thu Aug 22, 2024 5:20 amMoreTaxes wrote: ↑Thu Aug 22, 2024 1:11 amSmileyFace wrote: ↑Tue Aug 20, 2024 9:10 pmThe referenced submit additionally was somebody that unnecessarily filed 1099-Q and 529 expense data into turbo-tax so I do marvel if these which might be getting CP2000’s are solely these which might be unnecessarily submitting data that’s inflicting the question.
The referenced submit was from somebody who obtained a letter from the IRS saying that the 1099s had been not included of their return. The IRS will get a direct copy of your entire 1099s, and which may be the seemingly supply of the IRS letter.
Unclear if the OP filed the 1099s or not BUT The OP references filling out worksheets for school bills. Why did they try this? There is no such thing as a want if all bills had been certified. Submitting further/pointless information with the IRS relating to school is what may have set off the inquiry.
My statement is that those who have gotten these inquiries are submitting school expense information – over 11 years of my youngsters going through school I by no means filed such information and by no means bought an inquiry and have not seen people report right here getting an inquiry besides these getting into pointless information.
TT will ask you to enter all expense information when you enter your 1099Q – so that’s one purpose folks could also be filling out the bills information.The poster made clear that the 1099s weren’t filed, as they are saying within the first sentence of their submit:
“We obtained a dreaded CP2000 letter yesterday from the IRS ‘proposing’ a big cost from us with respect to our 2022 return based mostly on 4 1099s that the IRS mentioned weren’t included on our return.”
Worksheets are usually not despatched to the IRS both.
The poster didn’t make it clear that the 1099s weren’t filed.
The poster said that the IRS said they weren’t filed. The poster by no means said whether or not or not he filed them. That is why I mentioned it is not clear. I as soon as had the IRS inform me I did not file one thing that was filed – they make errors.
Relating to the worksheets – When you enter the info into TT there are a number of varieties they may probably embrace together with your return – we do not know what varieties, if any, might have been triggered.
I’m not concluding something BTW – I mentioned “I ponder” and “my statement” relating to whether or not the pointless information is triggering the inquiries. I simply do not consider in doing further pointless work on my taxes nor in submitting 1099s when the directions (and all on-line sources) inform you that you simply need not.
Re: 529 withdrawal process
MoreTaxes wrote: ↑Tue Aug 20, 2024 5:07 pmSchruteB&B wrote: ↑Tue Aug 20, 2024 3:37 pmcshell2 wrote: ↑Tue Aug 20, 2024 3:20 pmxzhou wrote: ↑Tue Aug 20, 2024 3:10 pm
If the college can obtain 529 cash, that will be the way in which to go.
In our case, sending cash to our child turned out to be higher than sending to us, since tax submitting includes explaining the transaction is just not revenue for us. It’s higher to your child to have a checking account to obtain the cash by way of ACH than by way of test within the mail.If the bills are certified, nothing goes in your taxes in any respect with a 529 withdrawal.
Appropriate. I have no idea what xzhou is referring to?
You may withdraw from a 529 in quite a lot of methods.
I’ve been doing it for six years and have all the time discovered it finest for me to withdraw the cash from the 529 and into my linked checking account. When it arrives, I ship it electronically to the college. That is permitted and doesn’t require any rationalization in my tax submitting.I agree with xzhou, that the taxes are loads easier when you distribute the cost on to the college. Second finest can be to distribute on to the scholar. Should you distribute to your self, Vanguard will ship you a 1099-Q. TurboTax, to call one program, goes to ask you to enter the 1099-Q and it’ll deal with this distribution as revenue until you additionally individually enter eligible bills on this quantity and punctiliously observe that your baby is a full-time scholar, and so on. The foundations for eligible bills for 529 distributions are usually not the identical as deductible instructional bills, and that may additionally chunk you. TurboTax is just not nice at cautioning you the distribution is being taxed.
One different factor that journeys up lots of people is when the spring tuition comes due. To organize, folks take a 529 distribution to their checking account in December. Then they pay the invoice when it’s due in January. So they have a distribution within the prior yr with no instructional expense paid in that yr. That makes the distribution taxable.
Briefly, there there are many methods to unintentionally make a minor a mistake in timing distributions or submitting your taxes that trigger your 529 distribution to finish up being taxable. In my years of expertise doing this, I’ve discovered it a lot simpler to keep away from the complication and distribute on to the college.
Thanks MoreTaxes for the minute particulars and others. I’m going to bookmark this submit in my finance paperwork.
ssn
Re: 529 withdrawal process
I do not recall ever having any problem with 529 withdrawals coming to me, however we typically paid tuition and charges up entrance and reimbursed ourselves. The one TurboTax weirdness I encountered was one yr when it by no means requested me if our child was a full time scholar and I had to enter the shape immediately and test that field.
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Re: 529 withdrawal process
Keep in mind: Educational 12 months and Calendar Tax yr are usually not the identical. Make sure your withdrawals for bills match the calendar tax yr. In different phrases, do not pay the Spring semester (subsequent calendar yr) tuition in December (earlier tax yr). It may be difficult when the Spring tuition invoice needs to be there at first of January. That is why many pay the invoice and reimburse themselves as an alternative of paying the college immediately. Had 3 kids undergo this. One yr, registration was dropped for one baby as a result of it took so lengthy to get the test there from the 529 Plan in January. Whole PIA.
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Re: 529 withdrawal process
goodenyou wrote: ↑Thu Aug 22, 2024 8:21 pm
Keep in mind: Educational 12 months and Calendar Tax yr are usually not the identical. Make sure your withdrawals for bills match the calendar tax yr. In different phrases, do not pay the Spring semester (subsequent calendar yr) tuition in December (earlier tax yr). It may be difficult when the Spring tuition invoice needs to be there at first of January. That is why many pay the invoice and reimburse themselves as an alternative of paying the college immediately. Had 3 kids undergo this. One yr, registration was dropped for one baby as a result of it took so lengthy to get the test there from the 529 Plan in January. Whole PIA.
There is no such thing as a purpose why you may’t pay for Spring semester in December and withdraw the cash out of your 529 in December to take action.
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Re: 529 withdrawal process
I’ve T Rowe worth because the custodian, but it surely’s seemingly the identical at Vanguard. Best and finest is when you merely direct them to make the cost on to the tutorial establishment. That approach there’s by no means a query it is a certified distribution because it by no means touches your private account.
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Re: 529 withdrawal process
SmileyFace wrote: ↑Thu Aug 22, 2024 8:37 pmgoodenyou wrote: ↑Thu Aug 22, 2024 8:21 pm
Keep in mind: Educational 12 months and Calendar Tax yr are usually not the identical. Make sure your withdrawals for bills match the calendar tax yr. In different phrases, do not pay the Spring semester (subsequent calendar yr) tuition in December (earlier tax yr). It may be difficult when the Spring tuition invoice needs to be there at first of January. That is why many pay the invoice and reimburse themselves as an alternative of paying the college immediately. Had 3 kids undergo this. One yr, registration was dropped for one baby as a result of it took so lengthy to get the test there from the 529 Plan in January. Whole PIA.There is no such thing as a purpose why you may’t pay for Spring semester in December and withdraw the cash out of your 529 in December to take action.
You positive can. Whenever you line up the bills for the withdrawal they received’t match tax years. You’re going to get a 1099 for the whole tutorial yr that’s technically in 2 calendar tax years.
You may learn poster’s aggravation with the IRS over the problem.
“Ignorance extra ceaselessly begets confidence than does information” |
“At 50, everybody has the face he deserves”
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Re: 529 withdrawal process
goodenyou wrote: ↑Thu Aug 22, 2024 9:17 pmSmileyFace wrote: ↑Thu Aug 22, 2024 8:37 pmgoodenyou wrote: ↑Thu Aug 22, 2024 8:21 pm
Keep in mind: Educational 12 months and Calendar Tax yr are usually not the identical. Make sure your withdrawals for bills match the calendar tax yr. In different phrases, do not pay the Spring semester (subsequent calendar yr) tuition in December (earlier tax yr). It may be difficult when the Spring tuition invoice needs to be there at first of January. That is why many pay the invoice and reimburse themselves as an alternative of paying the college immediately. Had 3 kids undergo this. One yr, registration was dropped for one baby as a result of it took so lengthy to get the test there from the 529 Plan in January. Whole PIA.There is no such thing as a purpose why you may’t pay for Spring semester in December and withdraw the cash out of your 529 in December to take action.
You positive can. Whenever you line up the bills for the withdrawal they received’t match tax years. You’re going to get a 1099 for the whole tutorial yr that’s technically in 2 calendar tax years.
You may learn poster’s aggravation with the IRS over the problem.
Certain they’ll line up – you might be billed in December (incurred the expense in December) and your withdrawl is in December. Nothing to place in your tax return.
As somebody identified in that thread you reference – you simply cannot pay in Jan and reimburse your self in December or vice-versa. Nothing in pub 970 or elsewhere saying you’ll want to delay a cost to a school to the yr the companies are offered.
The 1099Q you get comes out of your dealer and must be given to you for the yr the distribution is made. If it isn’t- your brokerage has executed one thing flawed.
