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Section 529 Plans: Rollovers to Roth IRAs, Front-Loaded Contributions, Beneficiary Changes, Form 1099-Q

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, August 6, 2024

Recorded event now available

or call 1-800-926-7926

This course will review the many decisions surrounding Section 529 plans from plan selection and qualifying beneficiaries through making qualified disbursements and reporting Form 1099-Q disbursements on the applicable taxpayer's tax return. Our authoritative panel will discuss beneficiary changes, superfunding a 529 plan, the new 529 plan to Roth transfer requirements, and coordinating these disbursements with other education benefits.

Description

The primary benefit of Section 529 plans is that they are relatively simple to establish and operate, and contributions and earnings can be withdrawn tax-free for qualified education expenses. In the past, a primary deterrent has been whether the beneficiary would need or be able to use all funds toward college, and if not entirely expended, the options for the remaining balance were limited. Now, the Secure Act offers a new Roth transfer for funds in 529 plans to alleviate these concerns. Although there is no federal tax deduction, most states offer some form of benefit or deduction for these contributions. However, not all states conform to the Secure Act's treatment of 529 to Roth plan transfers.

IRC Section 529(c)(2)(B) does provide some leniency for 529 plan contributions. It permits front-loading 529 plans. Lump sum contributions of up to $75,000 (five years at $15,000 a year) can be made for a single beneficiary without using a taxpayer's lifetime gift and estate tax exemption.

Listen as our panel of experts explains the operation and tax benefits of 529 plans, including beneficiary eligibility, qualified education expenses, and the related IRS reporting requirements.

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Outline

  1. Section 529 plans
  2. Choosing a plan
  3. Roth IRAs as an alternative
  4. Superfunding a 529 plan and the gift tax return
  5. Beneficiaries
    1. Eligible beneficiaries
    2. Changing beneficiaries
  6. Qualified expenses
  7. Coordination with other education benefits
  8. New transfer to Roth provisions
  9. Tax reporting: Form 1099-Q
  10. State deductions

Benefits

The panel will cover these and other key issues:

  • Requirements for permitted 529 to Roth rollovers
  • How to weigh the pros and cons of plans offered by specific states
  • How to handle a 529 plan investment when the designated beneficiary decides not to attend a qualifying education institution
  • Gift tax reporting requirements for superfunded 529 contributions
  • How to report distributions reported to the donor, rather than the recipient, on Form 1099-Q

Faculty

Pon, Lawrence
Lawrence K.Y. Pon, CPA/PFS, CFP, EA, USTCP, AEP
Tax Attorney
Pon & Associates

Mr. Pon has been in practice since 1986 providing comprehensive tax and financial planning, tax preparation and...  |  Read More

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