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How do I report 529 plan withdrawals on my son's tax return as the beneficiary?
My son is in his junior year of college, and I've been using our 529 plan to pay for his education costs. For the past couple years, I've claimed him as a dependent and included his tuition on my tax return. But this year, I realized the education credits aren't really benefiting me anymore due to our income level. I'm thinking it might make more sense to have him file his own return and claim the education credits himself. The only issue is that the 529 withdrawals were made in my name, even though he's the beneficiary of the account. I'm confused about how this works - does he have the right to report the 1099-Q on his return since he's the beneficiary? Or do we need to change something with the 529 account structure before he can start claiming these education expenses on his own tax return? The 1099-Q forms have been coming to me, but the funds were used for his qualified education expenses. I want to make sure we're handling this correctly for the 2024 tax year before we make any decisions.
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Got 1099-NEC by mistake as a corporation - ignore it or have customer void it?
We've been operating as a corporation for the past 3 years and just received a 1099-NEC from one of our clients. I'm pretty sure corporations aren't supposed to get these forms at all. This is the first time this has happened to us and I'm not sure how to handle it. Do we just file it away and ignore it since it doesn't apply to us? Or should I contact the client and ask them to void it? I'm worried if we do nothing, there might be some tax mismatch issues down the road when the IRS sees income reported that we're not including on our corporate return. Has anyone dealt with this before? What's the proper procedure here? We've got our tax appointment coming up in 2 weeks so I'd like to have this sorted before then.
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I had a similar issue last year. One important thing to remember is to make sure you're actually a corporation (C-corp or S-corp) and not an LLC. LLCs that haven't elected to be taxed as a corporation DO receive 1099-NECs if they're single-member LLCs. Some people mix up their business structure and think they shouldn't get 1099s when they actually should.
We're definitely a C-corporation, properly registered with the state and have been filing Form 1120 for the past three years. So in our case, the 1099-NEC is definitely incorrect. Thanks for bringing up the LLC point though - I'm sure that causes a lot of confusion for business owners.
Quick practical tip - when you contact the client, ask them to also provide you with a letter acknowledging the error for your records. I keep a file of these correction letters just in case the IRS ever questions why a reported 1099 didn't show up on our corporate return. Better to have documentation ready than to explain it during an audit!
Great advice! But what exactly should this letter include? Just a general "we sent this 1099-NEC by mistake" or should it have specific details?
The letter should include specific details like the tax year, the amount reported on the incorrect 1099-NEC, your corporation's name and EIN, and a clear statement that the form was issued in error because payments to corporations don't require 1099-NEC reporting. Something like "We acknowledge that the 1099-NEC issued to [Corporation Name], EIN [number] for tax year 2024 reporting $X in Box 1 was issued in error as corporations are not subject to 1099-NEC reporting requirements under IRS regulations." Having the client sign and date it makes it even more official for your records.
What does CODE 971 on IRS transcript mean? Should I be worried?
Just checked my transcript and saw code 971 pop up. Never seen this before and googling isn't helping much. Anyone know what this means and if I should be worried? Getting nervous about my refund tbh
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Code 971 just means they're sending you a notice - don't stress too much about it! I've gotten it twice and both times it was just them confirming info or explaining a small adjustment. The waiting is the worst part but most of the time it's really not a big deal. Keep checking your mail and your transcript for updates!
IRS Transcript Shows $8,965 Withholding Refund Still Pending with Codes 570/971 Despite $0 Balance - Amended Return Processed
My tax transcript is really confusing me. Looking at my 2024 account transcript for my 1040, I'm seeing several codes and dates that I don't understand. I received my Internal Revenue Service account transcript from the United States Department of the Treasury, and it contains information that's making me uncertain about my refund status. The transcript shows I'm filing as Single with an Adjusted gross income of $7,762.00 and Taxable income of $0.00. My Tax per return is listed as $1,836.00. It shows SE taxable income of $7,713.00 with a Total self employment tax of $1,180.00. My Return due date or return received date is listed as 04-15-2024, with a Processing date of 04-29-2024. Here are the transactions that are confusing me: TRANSACTIONS CODE EXPLANATION OF TRANSACTION CYCLE DATE AMOUNT No tax return filed 766 Credit to your account 04-15-2024 768 Earned income credit 04-15-2024 426.00 570 Additional account action pending 04-29-2024 $0.00 971 Notice issued 05-06-2024 $0.00 CP 0005 971 Amended tax return or claim 07-19-2024 $0.00 forwarded for processing 764 Earned income credit 04-15-2024 -$169.00 806 W-2 or 1099 withholding 04-15-2024 -$8,965.00 291 Reduced or removed prior tax 11-04-2024 -$656.00 assessed There's a code 570 (Additional account action pending) from 04-29-2024 and a 971 (Notice issued) from 05-06-2024, followed by another 971 in July for an amended return, and then a 291 code in November that reduced my assessment by $656.00. My transcript shows EIC credits (code 768 for $426.00 and code 764 for -$169.00) and withholding (code 806 for -$8,965.00) from April 15. The weird thing is my account balance shows $0.00 (as of 11-04-2024), with no accrued interest or penalties, but I'm still waiting on my refund. The transcript literally says "Account balance: $0.00 As of 11-04-2024" and "Accrued penalty: $0.00." My return was processed on 04-29-2024, and I even got a CP 0005 notice. I also see reference numbers at the bottom: 09254-684-05479-4 and 80211-450-33284-4. Can anyone help me understand what's happening with all these transactions and when I might get my refund? The transcript says "This Product Contains Sensitive Taxpayer Data" but I'm struggling to interpret what it all means for my refund status.
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Looking at your transcript, that code 291 from November reducing your assessment by $656 is actually a good sign - it means the IRS made an adjustment in your favor. Combined with your $0 balance, it suggests they've finished their review work. The hold might be close to releasing since they've completed the adjustments. I'd expect movement on your refund within the next few weeks, especially since it's been months since the initial CP05 notice. Keep checking your transcript for any new codes!
Can I Open a New HSA Account Without Having an HSA-Eligible Health Plan?
I'm planning to get married in a few months, and I have an existing HSA from my previous job that has a good amount of money invested in it. I'm trying to protect my pre-marriage HSA assets in case of a future divorce (not that I'm expecting one, but you know, better safe than sorry). My plan is to open a second HSA account where I can transfer just the interest and dividends that my original HSA earns post-marriage. This way, the original HSA and its principal balance would remain clearly identified as pre-marital property, while the new gains would be in a separate account. The problem is that I no longer have an HSA-eligible high deductible health plan. When I tried to open a new HSA at Fidelity, they told me I couldn't because I don't currently have a qualifying health plan. I'm confused because I'm not planning to make new contributions from my income - I just want to move the investment earnings from one HSA to another. Both accounts would only contain money that was already properly contributed to an HSA when I did have an eligible plan. IRS Publication 969 seems to focus on rules for contributions rather than just opening the account. Technically I would be "contributing" to the new HSA, but only with money that's already tax-exempt from my existing HSA's earnings. Is there a way to do this? Or am I stuck with everything mixed together in one account?
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Has anyone considered that it might just be easier to get a prenup? I'm not a lawyer but wouldn't that be a simpler way to establish which assets are pre-marital vs. marital property, including the entire HSA account?
This is actually the most practical solution. I went through a divorce last year and had a similar concern with my HSA. Our prenup clearly specified that my HSA (including all future growth) remained separate property. It was WAY simpler than trying to juggle multiple accounts and maintain separate records for years.
I'm a tax attorney who's dealt with this exact scenario multiple times. The consensus here is correct - you absolutely cannot open a new HSA without current HDHP coverage, even for transfers from existing HSAs. However, I want to address the underlying asset protection concern. While detailed record-keeping is helpful, it's not bulletproof in divorce proceedings. Courts can still rule that investment growth during marriage constitutes marital property regardless of your documentation. The prenup suggestion is spot-on and would be much more legally robust. You could specify that your entire HSA (including future appreciation) remains separate property. Alternatively, the prenup could establish that only the pre-marital balance stays separate, with post-marriage growth being marital property - which achieves exactly what you were trying to do with separate accounts. Given that you're getting married in a few months, consulting with a family law attorney about including HSA provisions in a prenup would be far more effective than trying to navigate HSA eligibility rules. The legal protection would be stronger and you wouldn't have to wait for open enrollment periods or manage multiple accounts.
Danielle Mays
Has anyone had experience with changing the account owner on a 529 plan? I'm thinking about making my son the owner of his 529 to simplify this whole process for future years.
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Roger Romero
I did this when my daughter turned 22. It was actually pretty simple - I just had to fill out a change of ownership form with our 529 plan administrator. But check with your specific plan first, as some plans have restrictions on changing ownership.
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Zara Shah
Just went through this exact situation last year with my daughter! The key thing to remember is that even though you own the 529 account and receive the 1099-Q, your son can absolutely claim the education credits on his own return as long as he's not your dependent. Here's what we learned: The 1099-Q itself doesn't need to be "reported" as income if all the distributions went toward qualified education expenses. Your son would claim the American Opportunity Tax Credit or Lifetime Learning Credit based on the actual tuition and fees paid, regardless of the funding source. One important note - make sure to run the numbers both ways before deciding. Sometimes parents in higher income brackets actually benefit more from claiming the dependent exemption than the student gains from the education credits, especially if the student has little other income. But if you're phased out of the education credits due to income limits, then having your son claim himself usually makes more sense. Also keep good records showing the 529 distributions matched up with qualified expenses, just in case the IRS has questions later. The account ownership doesn't matter for tax purposes - what matters is who the beneficiary is and whose education expenses were paid.
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