1099 Q

Technical topics regarding tax preparation.
#1
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Client's financial advisor advises him to take all money out of his sons 529 plan and put the money in a savings account.

Advisor tells him as long as he only uses the savings account for college expenses this is allowed.

For 2021 have a large distribution in excess of basis on the 1099Q. The 1098T of course is a much smaller number. Added other allowable expenses books..room and board..supplies.

Coming up with a taxable distribution and penalty.

Any ideas on how I can reduce the taxable income and penalty. Thank you
 

#2
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Here's a discussion of possibly counting education expenses for the following year against the current year's distributions.
viewtopic.php?f=8&t=23354
 

#3
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beardenjv wrote:Here's a discussion of possibly counting education expenses for the following year against the current year's distributions.
viewtopic.php?f=8&t=23354


Thanks for the information. From what a read in the prior posts had to deal with taking a distribution in the year after the tuition was paid.

My case the client took a distribution for tuition he expects to pay in future years.
 

#4
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Ok, I guess I got it backwards - but using the same logic, you may be able to count future expenses against this year's distribution. But I wouldn't recommend that unless 1) you agree that distributions don't have to be in the same year as the expense, which some people would say is up for debate, and 2) the expenses were paid or incurred before you file the tax return (although amended returns could be used to claim more future expenses later).
 

#5
Nilodop  
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I wonder what the advisor had in mind with his recommendation? IRS will now be receiving tax on the earnings of the savings a/c.
 

#6
Joan TB  
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You mean you can actually earn interest on savings accounts now? 1/10th of 1% doesn't really count.
Lately what I have seen is they don't even hit the $10.00 level of having to report on 1099-INT. LOL

Seriously, tho, I have been involved lately with several advisors who don't know what they are doing...
 

#7
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Surprise Suprise now the advisor admits he was wrong and tells the client he can't do this.

Thanks to all who responded
 

#8
JR1  
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Duh.
We knew that.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 


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