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I received a notice from the IRS that I owe them money based…

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I received a notice from...
I received a notice from the IRS that I owe them money based on a withdrawal from a 529 plan from 2015. At the time, I was the student and my parents had control over the 529. Am I responsible for this tax liability?
Submitted: 11 months ago.Category: Finance
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9/27/2017
Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,877
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello my name is ***** ***** I will be able to assist you today.

If you did not receive the money, or used the distributions for qualified higher education then you should reply to the IRS with that information.

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Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

"You or your beneficiary—you get to choose who receives the money—will have to report taxable income and pay a 10% federal penalty tax on the earnings portion of the non-qualified distribution."

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Customer reply replied 11 months ago
Right, so I definitely was not the recipient of the money. They are estimating a tax liability of almost $4000, not including penalties.I should respond via mail with a letter stating that I was not the recipient of the 529 withdraw, and the information of my father (who controlled the 529) as the recipient?
Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

It is important that you do respond to the notice within 30 days. Generally, the notice from the IRS is there attempt to collect further information. If you did not receive the money, then you would not owe the tax. However, the burden of proof is on the taxpayer.

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Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

Exactly, respond via mail stating that you did not receive the money. I would also state who did receive the money, because the IRS will generally ask.

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Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

From what you are stating, I do not believe you will have difficulty clearing up this issue. You just have to respond with the information you have given me.

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Customer reply replied 11 months ago
Ok, the other related question I have is that there is a table here that shows what was reported vs what was shown on my return. There is another $27,000 from the 529 that was reported, and that was included on my return. But looking at my 2015 federal return, I did not report the $27,000 because, again, I was not in control of the 529 as the student. Would the 529 plan or my parents have reported this other amount?
Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

The 529 plan always reports any distribution from a 529 plan. Some of the distribution may have even included your parents initial contribution, which would not be taxable your father either. He would just have to report his cost basis to the IRS.

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Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

If you have any further questions please let me know.

If you are satisfied with this answer, a positive rating by clicking on three stars or more would be appreciated. Thank you!
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Financial Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago

If you have any further questions please let me know.

If you are satisfied with this answer, a positive rating by clicking on three stars or more would be appreciated.

Thank you!

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Customer reply replied 11 months ago
One additional question, so it looks like I should have filed approximately $6,000 in 1099 income in 2015. This is in addition to the issue with the 529. How do you suggest I go about disputing the 529 issue, and calculating the amount owed on $6,332 in 1099 income?
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