West Virginia State Treasurer John Perdue urges anyone who paid for spring semester college expenses using savings from a SMART529 account to reinvest school refunds issued in wake of the coronavirus pandemic. Those who don’t may be subject to federal and state taxes if the money is spent on non-higher education expenses.
This comes after a recent IRS notice allowing those who paid expenses out of any 529 account to recontribute the refund during an extended period or show that it was spent on education costs.
“I want to make people aware of IRS rules governing all 529 plans. Money contributed to and withdrawn from 529 plans must be spent on college and trade school tuition or other higher education expenses. Unfortunately, this is not a windfall,” said Treasurer Perdue.
Generally, 529 funds must be redeposited from higher education institutions within 60 days of the refund dates. However, in the wake of the coronavirus pandemic, the IRS issued temporary guidelines extending that 60-day period to July 15, 2020 or 60 days from the date you received the refund, whichever date is later. Individual account owners are responsible for keeping track of their records to avoid tax consequences.
“Higher education institutions across the state are closing dorms and shifting to online learning during this unprecedented time,” said Treasurer Perdue. “I want to make sure parents and students know its an easy process to reinvest any refunds into their SMART529 accounts.”
Marshall University has already announced it will refund a percentage of a student’s room and board for the spring semester, because the virus shut down dormitories. Tuition is not being prorated, however, with classes being taught online.
There is another reason to reinvest the money, the Treasurer said.
“The money can grow over time,” he said. “The environment in which we are in will not last forever. SMART529 consistently shows competitive returns for investors.”
SMART529 is West Virginia’s officially sanctioned college savings plan. It offers tax advantages to West Virginia residents. Treasurer Perdue is chairman of SMART529’s governing board.
As always, consult with your tax advisor regarding tax implications on all refunds and redeposits. For more information about the program and reinvestments go to www.SMART529.com or call 1-866-574-3542.