529 Logistics question- payment of tuition

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SilverGirl
Posts: 120
Joined: Sun Oct 15, 2017 8:55 pm

529 Logistics question- payment of tuition

Post by SilverGirl »

I made a mistake and wanted to check to see here what the best way to move forward is.

I have a 529 at Fidelity for my son who is starting college this fall.

I do not plan to use 529 funds for this year, I want to let them hopefully recover a bit, and instead will cashflow the first two years. (The funds are only enough to cover one year anyway)

I created a CMA account at Fidelity and called it 'College Cash Flow'. Tuition will be paid from a variety of sources throughout the year, so I thought the easiest way for me to handle it, is to set up this one account as my payment method with his college and then make all payments from this method via their online payment interface.

In preparation for the first quarter's tuition, I meant to transfer a 27,000 profit draw from our business account into the "College Cash Flow" account and then make the payment from there.

I accidentally transferred it into the 529 account directly. (I have 9 accounts at Fidelity so my transfer screen is a little crazy).

Can I just transfer the cash from the 529 account into my 'College Cash Flow' account? Will there be tax consequences to this?

Thanks in advance for any advice. I realize that I may be overthinking this, but we are new to this and I have not taken any money out of a 529 yet.
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Lee_WSP
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Location: Arizona

Re: 529 Logistics question- payment of tuition

Post by Lee_WSP »

Try calling fidelity to reverse the transaction.
cowbman
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Re: 529 Logistics question- payment of tuition

Post by cowbman »

I don't know for certain, but I'd guess there is a return of contribution form and process. You will likely need to call Fidelity.
986racer
Posts: 273
Joined: Thu Aug 11, 2016 10:09 am

Re: 529 Logistics question- payment of tuition

Post by 986racer »

What's the issue though? Couldn't you just pay tuition and housing expenses from the 529 that you contributed to?
TravelforFun
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Joined: Tue Dec 04, 2012 11:05 pm

Re: 529 Logistics question- payment of tuition

Post by TravelforFun »

SilverGirl wrote: Fri Aug 05, 2022 12:52 pm I made a mistake and wanted to check to see here what the best way to move forward is.

I have a 529 at Fidelity for my son who is starting college this fall.

I do not plan to use 529 funds for this year, I want to let them hopefully recover a bit, and instead will cashflow the first two years. (The funds are only enough to cover one year anyway)

I created a CMA account at Fidelity and called it 'College Cash Flow'. Tuition will be paid from a variety of sources throughout the year, so I thought the easiest way for me to handle it, is to set up this one account as my payment method with his college and then make all payments from this method via their online payment interface.

In preparation for the first quarter's tuition, I meant to transfer a 27,000 profit draw from our business account into the "College Cash Flow" account and then make the payment from there.

I accidentally transferred it into the 529 account directly. (I have 9 accounts at Fidelity so my transfer screen is a little crazy).

Can I just transfer the cash from the 529 account into my 'College Cash Flow' account? Will there be tax consequences to this?

Thanks in advance for any advice. I realize that I may be overthinking this, but we are new to this and I have not taken any money out of a 529 yet.
You made a mistake that saves you money. Leave that $27k in the 529 account and use it to pay for college. Any gain the $27K make is tax-free.

TravelforFun
marcopolo
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Joined: Sat Dec 03, 2016 10:22 am

Re: 529 Logistics question- payment of tuition

Post by marcopolo »

Lee_WSP wrote: Fri Aug 05, 2022 1:15 pm Try calling fidelity to reverse the transaction.
+1

If you do this quickly enough, they might be able to reverse this before the funds "settle" in the new account.

Absent that, it probably still does not make much difference. Some of the existing gains (assuming you have gains in the account) will come out when you withdraw from the account. Withdrawals come from basis and gains proportionately. But, as long as you use the funds for qualified expenses, none of the gains will be taxable anyway.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
SilverGirl
Posts: 120
Joined: Sun Oct 15, 2017 8:55 pm

Re: 529 Logistics question- payment of tuition

Post by SilverGirl »

Thank you, this is helpful. I wasn’t sure how it would work out
Topic Author
SilverGirl
Posts: 120
Joined: Sun Oct 15, 2017 8:55 pm

Re: 529 Logistics question- payment of tuition

Post by SilverGirl »

986racer wrote: Fri Aug 05, 2022 5:18 pm What's the issue though? Couldn't you just pay tuition and housing expenses from the 529 that you contributed to?
I can. I’m overthinking it. I’m a bucket person and I wanted it to come from the right bucket, and to just set up one source of payment on the tuition payment site, but it’s probably simpler to set up two payment sources than it would be to reverse this transaction.
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