529 plan—refund of room & board

[Anonymous]

My student came home from college to study online. They sent us a partial refund of room and board. I had already withdrawn the full amount paid from 529 plan. Do I have to return the money to the plan, or can I apply the room to “rent” at my house, and the board to the food I have to buy for the student? If not, can I apply funds to fall tuition?

[Anonymous]

My understanding is that you have to have receipts for eligible expenses that total up to your withdrawals. So, I would imagine fall receipts can cover the refund (if you take out less than you would have next fall).

I doubt that you can justify the at home costs. I mean, I understand your reasoning, but it would not be worth the effort or risk to argue it.

[Anonymous]

You got me thinking about our refund. Maybe there are other expenses I could justify (like books and travel) that I don't usually break out. But honestly, in the midst of the current chaos...I have a feeling no one is going to track us down for a few thousand dollars of our 529 disbursement.

[Anonymous]

Anonymous wrote:My student came home from college to study online. They sent us a partial refund of room and board. I had already withdrawn the full amount paid from 529 plan. Do I have to return the money to the plan, or can I apply the room to “rent” at my house, and the board to the food I have to buy for the student? If not, can I apply funds to fall tuition?

No. Call 529.

[Anonymous]

Anonymous wrote:You got me thinking about our refund. Maybe there are other expenses I could justify (like books and travel) that I don't usually break out. But honestly, in the midst of the current chaos...I have a feeling no one is going to track us down for a few thousand dollars of our 529 disbursement.

This. No one is going to check for the refunds. You have a receipt to show you spent it for a legit purpose.

IRS will be way to busy with CARES and PPP fraud to care about this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You got me thinking about our refund. Maybe there are other expenses I could justify (like books and travel) that I don't usually break out. But honestly, in the midst of the current chaos...I have a feeling no one is going to track us down for a few thousand dollars of our 529 disbursement.

This. No one is going to check for the refunds. You have a receipt to show you spent it for a legit purpose.

IRS will be way to busy with CARES and PPP fraud to care about this.

I don't know about that. I have received two IRS letters for most insignificant things (both 529 related). They compare your reported tax vs. other info they receive (in this case from school, maybe). Be care and make sure and don't assume they are "too busy".

[Anonymous]

Will you be paying tuition/r&b in the fall? It's still the same tax year. Just take less from 529 for that and supplement with non-529 money.

[Anonymous]

IRS has issued a ruling on this. Safest thing to do is to "redeposit refund into 529 plan" --Please consult your tax advisor and 529 plan for more information.

[Anonymous]

We redeposited our refund. Why risk it?

You can use the funds toward fall, but it might be cleaner to redeposit your refund and then request a new disbursement. Anyway, if something happens re: fall and your kid doesn't attend as expected, you'll be past the official deadline for redepositing (60 days).

[Anonymous]

Anonymous wrote:Will you be paying tuition/r&b in the fall? It's still the same tax year. Just take less from 529 for that and supplement with non-529 money.

+1

[Anonymous]

There is a cost of attendance for students who live at home. Use that one and prorate it.

But any tuition in the fall will eat up that refund for sure.

You just need the receipts.

[Anonymous]

We used our refund for summer classes.

[Anonymous]

Anonymous wrote:We used our refund for summer classes.

Our R/B and fees refund was $1350. My DD's summer class is $1400. They can come pry the $50 from my cold, dead hands!

[Anonymous]

Anonymous wrote:We redeposited our refund. Why risk it?

You can use the funds toward fall, but it might be cleaner to redeposit your refund and then request a new disbursement. Anyway, if something happens re: fall and your kid doesn't attend as expected, you'll be past the official deadline for redepositing (60 days).

This sounds prudent

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You got me thinking about our refund. Maybe there are other expenses I could justify (like books and travel) that I don't usually break out. But honestly, in the midst of the current chaos...I have a feeling no one is going to track us down for a few thousand dollars of our 529 disbursement.

This. No one is going to check for the refunds. You have a receipt to show you spent it for a legit purpose.

IRS will be way to busy with CARES and PPP fraud to care about this.

I don't know about that. I have received two IRS letters for most insignificant things (both 529 related). They compare your reported tax vs. other info they receive (in this case from school, maybe). Be care and make sure and don't assume they are "too busy".

What do you recommend?
For regular transactions, Is it alright to request a disbursement from 529 and then pay the college by personal check? What records do you recommend we maintain?