Happy 5/29! 529 Day doesn't get quite the attention of Pi Day or May the Fourth. To celebrate, let's talk about taking money out of your 529, since there's plenty of info out there about getting money in.

You have three choices when withdrawing from your 529:

• Send the distribution to the account owner

• Send the distribution to the beneficiary (the student)

• Send the distribution directly to the college

Most of the time, the best choice is to send the distribution to the student. Which I know sounds crazy. But before you go all "No !@#% way am I sending all this money to my kid!" on me, hear me out on this because there are multiple reasons why this works best.

First, whoever receives the distribution will also get a 1099-Q issued in their Social Security number. (If the distribution goes to the college, the student will receive the 1099-Q.) Students also receive a 1098-T, or tuition statement, from their college. The 1098-T has their Social Security number and shows the gross and net (of scholarships) amount of tuition and fees paid to the college.

Qualified distributions from 529s-- those used to pay for tuition, fees, room, board, books and required supplies-- do not need to be reported on your tax return. However, if a 1099-Q is issued for a SSN that doesn't have a corresponding 1098-T (with the same SSN), the IRS is likely to send a notice letter to the recipient of the 1099-Q asking for documentation that the 529 distributions were used to pay for Qualified Higher Education Expenses. Most of us want to minimize our interactions with the IRS; having the distribution sent to your student rather than to you will help you to avoid that particular interaction.

Second, if you ever have a nonqualified distribution-- for example, if you withdrew more than the amount of qualified expenses or wanted to claim the AOTC and therefore needed some of the distribution to be non-qualified-- the nonqualified portion is taxable to the person who received it. Most students are in a lower tax bracket than their parents, and in fact many have room for additional tax-free income before they hit the standard deduction and thus might only be subject to the 10% penalty on earnings. For example, let's say you have a $2,000 nonqualified distribution that's 50% contributions and 50% earnings. If the parent is in the 22% tax bracket, the penalty for the nonqualified distribution would be $320-- 22% tax and 10% penalty on 50% of the distribution-- whereas the student might only pay the 10% penalty.

What about sending it directly to the college? A couple of reasons why this might be more complicated than it seems.

• 529 distributions received directly by the college are often erroneously posted as outside scholarships. For a student receiving need-based aid, this can mess up their scholarship package. It's fixable, but it's a pain in the neck.

• You might not know what you need to pay until very shortly before it's due, which can make it difficult to send money directly from your 529 to the college and have the payment post in time. Most colleges send out preliminary billing statements that don't include financial aid or outside scholarships; you might not see an accurate total amount due until a couple of days before you need to pay it. (Your financial aid award letter probably included last year's tuition and fees, not this year's, so your actual costs may be a little different.)

• If your student lives off campus, they're probably not paying room and board costs directly to the college.

There are a few logistics to sending a distribution out to your student, which is why I'm writing about this now rather than in the fall. First, many 529 plans require that a bank account be linked to the 529 account for 30 or 60 days before a distribution can be sent to it. (This is an anti-fraud measure to make sure that you actually get your money.) If your first tuition payment is due in early or mid-August, you'll want to get your bank account linked ASAP.

I encourage parents to set up a dedicated bank account to receive the distributions, and to have this dedicated bank account linked to the parents' bank account so the parents can pay the bills. My kids each have an online savings account that we use for this. I send the distribution to the online savings account, then transfer it to my bank account to pay their bills. My son, who lives off campus, gets a monthly transfer into his "normal" bank account to pay his rent.

529 distributions don't need to be matched to payments. You can take the funds out at any point during the calendar year. Your 1099-Q will only show the total amount withdrawn, not when and in what amounts withdrawals were taken. They do need to be matched to expenses, which includes payments made in December for academic terms starting the first part of the following year.

Another important thing about 529s: If your state offers a tax benefit for contributions, you can continue making contributions during the college years to continue receiving the tax benefit. Just check your state's requirements for your final college year before contributing to your college senior's account: often you need to have the deductible amount in your account on Dec. 31 in order to claim the tax benefit.

Big news: My book How to Pay for College will be available July 19! You can preorder it from Amazon, Barnes & Noble, or your favorite independent bookstore now.