529planRefunds

Campus Closed, College Refunds and My 529 Plan

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Did the recent coronavirus outbreak close your educational institution? Did you pay for your expenses with funds from a 529 plan? It is important to understand how you will be affected if this applies to you.

The recent Covid-19 outbreak has forced the closure and move to online classes for many educational institutions. They are going to be processing reimbursements for room and board, tuition, and other expenses due to the closure of their campuses. This complicates things for those that may have paid for these expenses by using their 529 plan. Typically, you can only use funds from your 529 to pay for expenses incurred in the current year. Funds withdrawn in excess of the expenses incurred would be considered a non-qualified distribution. This type of distribution would be taxable plus a 10% penalty at the beneficiary’s tax rate.

Families that have or are expecting to receive a refund should understand what options they have to avoid an unnecessary tax. In most instances you would have 60 days, from the point you receive the refund, to return the unused portion of the funds that have been withdrawn from the account to avoid the tax. The IRS has recently issued guidance under the CARES Act that although the 60 days window still applies, a beneficiary that received a refund after February 1, 2020, will have until July 15, 2020, to return the funds to their 529 plan.

It is important that you do not return more than the refund to the plan. The additional amount will be considered a new contribution. You must also return the funds to an account for the same beneficiary, so make sure you are returning it to the right account. The option to keep the refund is possible, but it will then be considered a non-qualified distribution which will be taxed as mentioned above.

You will want to make sure that you have an accurate accounting of what has taken place. It is advised that beneficiaries and account owners document all the transactions that have happened with the 529 plan if you need to justify how the refund was handled. Having this documentation could ultimately help you avoid unnecessary tax and penalties.

It is highly recommended that you contact your 529 plan provider and accountant to learn the steps needed for returning the funds to your account. This will assure that you handle it the right way and your tax advisor is aware you have returned the funds. Both will also know that you are returning these funds and it should not be treated as a new contribution.

We would be happy to discuss your situation regarding refunds you have received back from your qualified educational institution if you had paid them with assets from a 529 plan. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

What Is Inflation?

Inflation seems to be the word of 2022!  We have not seen inflation rear its head in a very long time, and some have grown up not even hearing the term (outside of a classroom) before this year.  Now that inflation is being spoken about daily we feel it is important to make sure everyone …

The 80/80 Marriage with Nate Klemp, Episode #86

Dr. Nate Klemp is the founding partner of “Mindful” and co-author of the newly released, “The 80/80 Marriage,” a new model for a happier, stronger marriage. Nate and his wife have both led successful careers consulting for high-powered companies around the world. Their work as mindfulness a …

Tips to Help You Stay Strong During Market Volatility

It’s almost impossible not to feel anxious at the dips and dives the stock market has been taking recently, compounded by relentless inflation-focused headlines. That’s why you might be surprised to learn there’s a lot of positive news to be had, despite the market uncertainty. 

Profit Advisor, Episode #85

Pam Jordan is the President of Pivot Business Group. She is a no-nonsense financial expert and speaker who specializes in analyzing and streamlining the backend of fast-growing companies while efficiently creating more profit and strategic growth. Pam started the Pivot Business Group and wo …

1 2 3 119 120 121
529planRefunds

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation

TweetsFollow

  • Mitlin Financial

    This is part of why it’s about “time in the market not timing the market” https://t.co/EJ5PDBUzmP
  • Mitlin Financial

    “Debunking 6 Inflation Myths” by @rchusker for @Forbes https://t.co/bWLGHGq6l1
  • Mitlin Financial

    Money is ingrained in our everyday lives, but how and when should parents start talking about financial literacy with their children? Read this blog for guidance —> https://t.co/cVKXFYzM18 https://t.co/5lIbDlpFKN