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

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of Section 529 plans is that they are relatively simple to establish and operate, and contributions and earnings can be withdrawn tax-free for qualified education expenses.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.

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

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

Learning Objectives

After completing this course, you will be able to:

• Identify specific states that offer incentives for contributions to Section 529 plans
• Determine new requirements for 529 plan rollovers to Roth IRAs
• Decide who are eligible beneficiaries of Section 529 plans
• Ascertain when a ROTH IRA could be a viable alternative to a Section 529 plan

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).