Thank you frustrated. Here is my client's information. It sounds like your second scenario but it is not figuring a 10% penalty. 1099-Q is Gross Distribution=$4621, Earnings=$1691 and Basis=$2931. ...
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Thank you frustrated. Here is my client's information. It sounds like your second scenario but it is not figuring a 10% penalty. 1099-Q is Gross Distribution=$4621, Earnings=$1691 and Basis=$2931. My client's dependent had $5215 qualified education expenses, so I used $4000 of that for him to qualify for the $2500 AOC. Bill from Iowa that posted in 2019 about this said to use all the tuition first because that would be a bigger refund, which it does. On Form 5329, it reports $1691 as taxable distribution and zero penalty on lines 7 & 8. If he is subject to a penalty, why is it doing zero. I would have to override it to change it and it won't be able to be efiled.