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Re-Contribute School Refund To Your Ohio 529

529 Tips

Re-Contribute Your School Refund To Your Ohio 529 Account

Due to the COVID-19 safety precautions implemented nationwide, higher education institutions have transitioned to online learning from the rest of the semester. Schools also have also asked students to move out of their dorms and return to their permanent homes. With these closures, some schools are issuing refunds for housing, dining services, and other mandatory fees. The costs are considered qualified higher education expenses, and you may have used a tax-free 529 plan withdrawal to pay these costs.

If you receive money back for these qualified expenses and you originally paid for them with a withdrawal from your Ohio 529 Plan, you have two options with which you can use your refund:

  1. Apply the funds to a qualified higher educational expense during the same calendar year; and
  2. Place the funds back into your Ohio 529 account within 60 days of the check refund date. The refund from the school CANNOT be sent directly to Ohio 529 Plan.

For either option, you will need to keep detailed receipts/documentation. 

If you choose to recontribute those funds to your account, you will continue to benefit from the 529 tax advantages as well as to avoid any potential tax ramifications as the returned funds could now be considered part of your income if not re-deposited. Something to keep in mind: The IRS may consider the original 529 transaction as a non-qualified withdrawal because the funds are no longer being used to cover qualified higher education expenses.

The Protecting Americans from Tax Hikes (PATH) Act allows you to re-contribute those funds to your Ohio Direct 529 account. There are some guidelines including: 1) The refunded amount must re-deposited within 60 days of the issuance of the refund; and 2) it must be deposited into a qualified 529 account. As the account owner, you must keep track of all the records showing the date of the refund from the eligible educational institution and then its re-contribution into the 529 plan. Additionally, you will need to maintain all documentation linking the re-contribution to the refund from the eligible educational institution. You are responsible to make sure this transaction meets the Internal Revenue Service (IRS) requirements and is in good order.

As you deposit the refund, you must notify OTTA that it is a re-contribution of previously withdrawn funds and the refunded amount is compliant with the 60-day deadline. The notification to OTTA must include a letter of instruction signed by you detailing the account number of the 529 account from which the withdrawal was initiated along with the date and amount of the withdrawal. If these steps are not followed, the amount will be treated as a normal contribution and thus the original withdrawal may be considered a non-qualified withdrawal by the IRS. You should consult your tax advisor regarding the tax implications of any refunds and/or re-contributions.

Here are the steps to follow:

Direct 529 Plan Re-contribution

Re-contributions must be done by check. Please include the account number on the check. There is no form needed to make the re-contribution. However, you must include a signed letter stating that this is a re-contribution due to a school refund, the account number from which the original 529 withdrawal was made as well as the initial date of the withdrawal, and the date that you received the refund from the school. You need to keep a copy of your letter. Again all re-contributions must be made within 60 days of refund check date.

These steps will provide you a paper trail in case of an IRS audit, as you will still receive a 1099Q for the original withdrawal. You will need to document the refund from the school, the reason for the refund, and the re-contribution to the 529 plan made within 60 days of the refund check date.

You will then mail the signed notification letter and the check to:

CollegeAdvantage Direct 529 Savings Plan

PO Box 219305

Kansas City, MO  64121-9305

Depending on the amount of the refund you receive, there are different guidelines for the check:

  1. If under $10,000, the payee can endorse the schools refunded check and make it payable to OTTA, and keep a copy of the check for your records.
  2. If great than $10,000, you will need to cash the refund check, and then send OTTA a personal check for the re-contribution.

Guaranteed 529 Plan Re-contribution

The refund from the school CANNOT be re-contributed into the CollegeAdvantage Guaranteed 529 account, because this plan has been closed to contributions since the end of 2003.Therefore, the refund must be deposited into a CollegeAdvantage Direct 529 Plan or BlackRock CollegeAdvantage Advisor 529 Plan.

You must mail in a check as the re-contribution. Make sure to include the original Guaranteed account number as well as any already established Direct or Advisor account number.

As with making a CollegeAdvantage Direct 529 Plan, you must include a signed letter stating that this is a re-contribution due to a school refund, the account number from which the original Guaranteed 529 withdrawal was made as well as the initial date of the withdrawal, and the date that you received the refund from the school. You will also need to include the account number for the Direct Plan or Advisor in which you wanted to make the re-contributions. You need to keep a copy of your letter. Again all re-contributions must be made within 60 days of receiving the refund.

These steps will provide you a paper trail in case of an IRS audit, as you will still receive a 1099Q for the original withdrawal. You will need to document the refund from the school, the reason for the refund, and the re-contribution to the 529 plan made within 60 days of the refund check date.

If you are making the re-contribution to a CollegeAdvantage Direct Plan, mail the signed notification letter and the check to:

CollegeAdvantage Direct 529 Savings Plan

PO Box 219305

Kansas City, MO  64121-9305

If you are making the re-contribution to a BlackRock CollegeAdvantage Advisor 529 Plan, please contact your financial advisor to find out where to mail the signed notification letter and the check.

Depending on the amount of the refund you receive, there are different guidelines for the check:

  1. If under $10,000, you can endorse the schools refunded check and make it payable to OTTA.
  2. If great than $10,000, you will need to cash the refund check, and then send OTTA a personal check for the re-contribution.

If you do not have a CollegeAdvantage Direct 529 Plan, you can use your re-contribution from the Guaranteed 529 account to establish an Ohio Direct 529 account.

Again, remember that the re-contribution must be deposited back into the 529 plan account within 60 days of the refund being issued. Otherwise, the IRS may consider the refund to be part of your income and there may tax consequences. The IRS could also treat the original withdrawal as a non-qualified withdrawal and there could be tax consequences on the first transaction as well. Consult with your tax advisor regarding the tax implications of any refunds and/or re-contributions.

To reduce the potential spread of the COVID-19 virus, the Customer Service and Operation Team is working with a reduced staffing model and our Customer Service Line is not currently available. If you have account-specific questions regarding how to recontribute a refund to your 529 plan, please email customerservice@collegeadvantage.com with your inquiry, as well as a good daytime contact number and the best time of day to reach you. Email inquiries will receive a reply within one (1) business day. The Customer Service Team will make these outbound calls between 8:30 a.m. – 5 p.m. ET on Mondays, Tuesdays, Thursdays and Fridays, and between 8 a.m. – 4:30 p.m. on Wednesdays.

Someday your child is going to college. Someday starts today with CollegeAdvantage.com.

Posted on April 2, 2020

Ohio Tuition Trust Authority

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