Timely and Relevant News: COVID-19 and College Reimbursements
The coronavirus has shut down colleges across the nation and students are finishing up their final weeks attending what some are calling "Zoom University". Many colleges are refunding a portion of tuition and/or room and board costs. Those who have received a refund may be wondering if they can re-contribute those funds back into their 529 accounts.
According to researchers at John Hancock, the account holder has 60 days from the date of the refund to re-contribute the funds. The original distribution date is irrelevant. The IRS has extended the deadline further in 2020 so that re-contributions can be made until July 15, 2020.
In order to re-contribute funds to a 529 account, the account holder can send a personal payment or endorse the school's check to the 529 account. The funds will display as a 2020 contribution in the account.
If you choose to re-contribute funds to a 529 account, you must keep proof of the refund for your records. It will be your responsibility to provide the IRS with proof of the refund and the re-contribution. Make sure that you speak with your tax advisor for guidance.
Colleges are encouraging students to contact their financial aid office before applying for or accepting a refund. Accepting a refund could affect a students financial aid in the short or long term.
If you have any specific questions, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up a mutually convenient date/time to speak.