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Ok folks. I screwed up so you don't have to 
. Learn from my mistake.
On or about 12/15/15, I got an e-statement from DD's college for her spring semester tuition. The bill was for $15,835. A couple of days later, I logged into her 529 account and initiated a withdrawal for $15,835. A few days later, I checked my bank account and found that the money had been received. I logged back into the college account to pay the bill only to find that the balance listed was now $12,835.
The next day (it was in the evening), I called the financial aid office to discuss this but they were already closed for winter break, not to reopen until today, 1/4/16. So I parked this until I could talk to them.
I spoke to them today and they explained the reduced amount (my daughter was awarded a scholarship that we knew nothing about and it didn't get posted until after the initial bill was sent out. Immediately following that conversation, I went online and paid the bill.
So there are two big problems here, or at least one big problem and one smaller problem.
#1: The 529 withdrawal happened in 2015. The payment using those funds didn't happen until 2016. This is going to be a problem at tax time since we made a withdrawal in 2015 with no corresponding expense.
#2: The 529 withdrawal was for $3,000 more than the actual expense. This is a lesser problem because we can apply that $3,000 to next fall's tuition, but that still doesn't solve the 2015/2016 issue.
I've already been in touch with my accountant and the 529 plan administrator. It sounds like I'll have to file some type of letter of explanation with the IRS and hope they accept my excuse for the discrepancy.
Your lesson for today is to keep these transactions all within the same tax year. It just never occurred to me that that was even an issue until it was too late to fix it.
. Learn from my mistake.On or about 12/15/15, I got an e-statement from DD's college for her spring semester tuition. The bill was for $15,835. A couple of days later, I logged into her 529 account and initiated a withdrawal for $15,835. A few days later, I checked my bank account and found that the money had been received. I logged back into the college account to pay the bill only to find that the balance listed was now $12,835.
The next day (it was in the evening), I called the financial aid office to discuss this but they were already closed for winter break, not to reopen until today, 1/4/16. So I parked this until I could talk to them.
I spoke to them today and they explained the reduced amount (my daughter was awarded a scholarship that we knew nothing about and it didn't get posted until after the initial bill was sent out. Immediately following that conversation, I went online and paid the bill.
So there are two big problems here, or at least one big problem and one smaller problem.
#1: The 529 withdrawal happened in 2015. The payment using those funds didn't happen until 2016. This is going to be a problem at tax time since we made a withdrawal in 2015 with no corresponding expense.
#2: The 529 withdrawal was for $3,000 more than the actual expense. This is a lesser problem because we can apply that $3,000 to next fall's tuition, but that still doesn't solve the 2015/2016 issue.
I've already been in touch with my accountant and the 529 plan administrator. It sounds like I'll have to file some type of letter of explanation with the IRS and hope they accept my excuse for the discrepancy.
Your lesson for today is to keep these transactions all within the same tax year. It just never occurred to me that that was even an issue until it was too late to fix it.
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