IRS Announces Rollover Relief for Maryland Prepaid College Trust Accounts

The Internal Revenue Service has issued Notice 2024-23 providing relief for taxpayers impacted by system issues affecting the Maryland Prepaid College Trust. According to a news release, the guidance allows an exception to the one rollover per 12-month period tax limitation on rollovers if the following criteria are met.

• The taxpayer claiming relief makes a rollover to or from the designated beneficiary's Maryland Prepaid College Trust account before Jan. 1, 2025;
• The 12-month limitation described above would otherwise apply to the rollover to or from the Maryland Prepaid College Trust account; and
• The rollover was preceded by a qualified rollover from that same designated beneficiary's Maryland Prepaid College Trust account after Dec. 31, 2021.

Taxpayers receiving a Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530) that includes a distribution that is treated as a qualified rollover under these rules will not need to include the amount in gross income or report the amount on their tax return. Additionally, the 10 percent additional tax does not apply and taxpayers are not required to file Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts for such distribution.