Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 08-18-2017, 06:57 PM
Junior Member
 
Join Date: Aug 2017
Posts: 2
Savings plan refunded/taxes

Hello!
My grandparents opened a college saving account a long time ago with GET (Guaranteed Education Tuition in Washington state), which is a 529 prepaid college tuition plan. We requested a refund recently, but after several mishaps with the refund paperwork we ended up with the check in my grandmothers name instead of mine. Were wondering whether or not my grandma can just sign the check over to me, or if she has to deposit it and then transfer it. If she can sign it over, is she subject to any taxes (& how much)? Once its in my account, how much & what kind of taxes are owed on $27,000?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 08-18-2017, 07:00 PM
Junior Member
 
Join Date: Aug 2017
Posts: 2
Oh & there is no penalty for the early withdrawal, by the way



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 08-18-2017, 10:36 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
My grandparents opened a college saving account a long time ago with GET (Guaranteed Education Tuition in Washington state), which is a 529 prepaid college tuition plan. We requested a refund recently, but after several mishaps with the refund paperwork we ended up with the check in my grandmothers name instead of mine. ======>>They generally have some options when requesting a distribution from a 529 plan: 1) a check made payable to the account owner, 2) a check made payable to the student




Were wondering whether or not my grandma can just sign the check over to me, or if she has to deposit it and then transfer it.====>IF she wants it she can do it; then it is a gift

If she can sign it over, is she subject to any taxes (& how much)? Once its in my account, how much & what kind of taxes are owed on $27,000?===>> The tax consequences depend on who received the money from the 529 plan: your GP or you. If your GP, as account owner, requested the refund, she will be responsible for reporting the gain on her federal income tax return as "other income on line 21 of 1040. The 529 plan will send her a Form 1099-Q shortly after the end of the year. This document reports her distribution and breaks it down between basis (nontaxable) and earnings. Besides paying tax on the earnings at ordinary income rates, she will also be subject to a 10 % penalty tax on the earnings. She needs to compute this on Form 5329 and attach it to her Form 1040. For example, let's assume she is in the 25% federal income tax bracket. she'll owe total tax and penalty on her nonqualified 529 distribution equal to 35 % of the gain.If she lives in a state with an income tax, she will also owe state income tax on the earnings. This even includes tax on the "recapture" of any income tax deductions she may have claimed on her state taxes when contributing to the 529 plan; On the other hand, if she requested the distribution from the 529 plan be paid directly to you as beneficiary, Form 1099-Q will be issued with your Social Security number.However this Is not your situation. This means the earnings will be reportable (along with the penalty you?re your federal income tax return. After paying taxes your GM can give the money to you as a gift;as a done you, in this case, are not liable for any tax. But she needs to fiel form 709 if the amt of the gift exceeds $14K.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How to declare refunded income? EmilyB Miscellaneous 1 02-25-2015 02:50 AM
529 distribution and refunded waynekim Income 2 03-15-2014 04:11 AM
How can a taxpayer plan to avoid the possible wrath of the AMT taxes? TaxGuru Alternative Minimum Tax 0 02-22-2010 10:01 AM
What is Senator McCain's Tax plan when it comes to Estate Taxes? TaxGuru Republicans 0 09-27-2008 04:10 PM
Can we roll our Savings Bonds into a 529 Plan that we have in place for my son? Roberto Education Planning 1 03-14-2008 09:29 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.