"Net" distributions

michigan 2019-04-02 19:18:58 UTC #1

In a year when qualified distributions were taken from a 529, the parent mistakenly contributed funds late in the year, and then realizing the mistake, withdrew the funds. The 1099-Q from the 529 custodian reports the withdrawal that corrected the mistake as a distribution. Can the parent report only the "net" withdrawal for tax purposes?

dcandmc 2019-04-02 21:12:37 UTC #2

Why was the contribution a "mistake"? Why couldn't the funds just be left in the account to be used later for qualified expenses?

michigan 2019-04-05 16:05:29 UTC #3

I agree that the parent screwed up and I don't know the reason. The question is whether I can simply report the "net" distribution, or whether the gross withdrawal amount applies.

dcandmc 2019-04-06 23:14:22 UTC #4

All 529 distributions are made on a pro rata basis. If a distribution is not used for a qualified purpose, the earnings portion of the distribution will be taxable income for the recipient of the distribution, and the 10% additional tax may also apply.