Do you have a child in college and because of coronavirus you received a refund of some expenses? And did you pay for college using a 529 college-savings plan? If yes and yes, you may be facing an unexpected tax bill plus penalties unless you address this issue. That refund you received reduced your expenses that qualify for withdrawals from your 529 plan meaning that you now have taken more from your college-savings plan than the qualifying expenses incurred. That non-qualified withdrawal would be subject to taxes on the earnings portion of the withdrawal plus a 10% penalty. So now you have a couple of choices: 1) Put the money back into your 529 plan in a recontribution before July 15; or 2) Match the refund to new qualifying educational expenses for the same child that you will incur before year end. And then only take new withdrawals from your 529 plan for additional qualifying expenses above the amount of the refund. And definitely keep good records in case the IRS comes knocking some day.
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