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IRS Issues Guidance on 529 Qualified Tuition Programs
Washington, DC, December 10, 2001 - The Internal Revenue Service has issued Notice 2001-81, which provides guidance regarding certain recordkeeping, reporting, and other requirements applicable to qualified tuition programs under section 529 of the Internal Revenue Code. Among other things, the guidance provides that 529 programs will no longer be required to verify whether distributions from 529 programs are used for “qualified higher education expenses,” effective for taxable years beginning after December 31, 2001.
The notice states that the IRS and the Treasury Department are issuing the guidance to give 529 programs adequate time to implement appropriate recordkeeping and reporting procedures.
Specifically, the notice provides guidance in light of the changes to Code section 529 made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) regarding:
- verification of purpose of distribution and imposition of penalty;
- reporting of distributions;
- calculation of earnings;
- rollover statement between 529 programs;
- timing of earnings calculations; and
- aggregation of accounts.
The IRS invites comments on the matters described in Notice 2001-81 and any other matters relating to section 529 and the regulations thereunder. Comments are due by March 25, 2002.