Received 1099-Q form but never actually got the money - what do I do?

Thanks for explaining this! So if I got a 1099-Q for $16,000 but my qualified expenses were only $12,000, would I only pay taxes on the earnings portion of that $4,000 difference? And how do I figure out what portion is earnings vs principal?

You've got it mostly right. You would only potentially owe taxes on the earnings portion of that $4,000 difference, not the entire $4,000. The 1099-Q should break down how much of the distribution was earnings versus principal (original contributions). Look for Box 2 on the form which shows the earnings portion. If your qualified expenses were $12,000 and the total distribution was $16,000, you'd calculate the taxable portion based only on the earnings percentage of that $4,000 difference.

Does taxr.ai actually connect with a real person or is it just an algorithm? I'm dealing with a similar situation but my forms are complicated with multiple 529 distributions and I need someone who can actually understand my specific scenario.

I'm skeptical of these tax services. How do they handle privacy? I mean, we're talking about uploading sensitive financial documents. Do they store this information or delete it after analysis?

It's actually a combination - there's an AI algorithm that does the initial analysis of your documents, but they have tax experts who review complex cases. For something like multiple 529 distributions, you'd definitely get human attention to sort through the details. Regarding privacy, they use bank-level encryption and don't store your documents permanently. They analyze them, provide the guidance, and then delete the originals. They explain their security process when you sign up, and I felt comfortable with their approach after reading it. I wouldn't have used it otherwise since I'm pretty careful about my financial info too.

Wait, how does this Claimyr thing actually work? Do they just call the IRS for you? Couldn't I just have someone else in my house call the IRS and then come get me when someone answers?

This sounds too good to be true. I've spent literal DAYS trying to reach the IRS. No way this actually works - they probably just take your money and give you the same runaround you'd get calling yourself.

It's actually pretty simple - they use an automated system that waits on hold for you and then calls your phone when an IRS agent picks up. You don't have to stay by your phone listening to hold music for hours. It's different than having someone in your house call because their system is dedicated to just waiting on that IRS hold queue. I had the same skepticism before trying it. But after waiting on hold for 3+ hours myself with no success, I was desperate. The service actually connected me with an IRS agent in about 45 minutes (while I was doing other things). I didn't have to do anything until my phone rang and the agent was already on the line.

I had this exact situation! My grandparents had apparently set up a 529 for me as a baby and never told my parents. Years later, the distributions started going to my university. Check with extended family members too - might be a surprise gift someone forgot to mention.

That's a great point about checking with extended family! Sometimes these accounts are set up as surprises or the person who created it might have forgotten to mention distributions were starting. Another thing to consider is that the amount might be higher than your tuition because it could include room and board, books, supplies, and other qualified expenses. The 529 administrator might have sent a distribution that covered more than just the direct tuition bills.

This happened to me. My scholarships covered most of my tuition, but my parents still distributed funds from my 529 plan. We ended up having to pay taxes on a portion because you can't double-dip on tax benefits. Definitely worth getting professional help to sort it out.