Education Saving Account question
I have a client that is ready to start using an Education Savings Account for his granddaughter. My understanding that the Education Saving Account can be liquidated tax free as long as the account is used in a qualified manner. My question is, should my client disperse the funds and then submit receipts to his accountant to offset a possible 1099 form?
Permalink Submitted by Alan Spross on Tue, 2012-07-10 03:14
No, the client should first be sure that the expenses are qualified education expenses. If the distribution is not more than these expenses paid for the year the distribution is tax free and does not need to be reported on the tax return of the 1099Q recipient. Documentation of the expenses paid should be retained by the client. All client needs to do in this situation is inform the accountant that the distribution is tax free because it all went to pay qualified expenses.