Avoid IRS stress with 529 Purchase Protection

More 529 spending, less 529 worrying. Backpack's 529 Purchase Protection takes the guesswork out of what you can spend your 529 on and covers you in case anything goes wrong.

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Why Purchase Protection?

Maximize the use of your 529 worry free
One of the newer advantages of a 529 plan is its flexibility to cover not just tuition, but also non-tuition expenses like laptops, room and board, and even groceries. We spoke to too many student families that were worried about this grey area of non-tuition expense and not maximizing the use of their 529 funds.

Think of it this way, you're essentially giving up a discount on a new laptop by not using your tax-free 529 dollars. Our 529 Purchase Protection gives you this much needed peace of mind by certifying, documenting and tracking your spend for you as well as providing support and guarantees in the case of an IRS audit and any resulting taxes or penalties.
Access to our Eligibility Engine takes the guesswork out of spending your 529
You will never have to guess or stress about whether something is a qualified expense or not again. Backpack will review and certify your expenses as eligible - we stand behind this certification with our Purchase Protection, meaning if we say it’s eligible you don’t have to worry about taxes or penalties. Our team is also available to answer eligibility questions even before you purchase!
Coverage for up to 3.5 years on any taxes and penalties on eligible expenses
Our 529 Purchase Protection covers eligible expenses made during the Purchase Period that the policy covers. Those expenses are then covered against taxes and penalties imposed by the IRS for up to 3.5 years (or 42 months) after the Purchase Period.

Put simply, we aim to cover you for slightly more than the statute of limitations timeframe the IRS sets to be able to audit your tax returns. For more information, see our coverage period section below.
Track your spend against your coverage
We will help you certify, document and track your eligible spend by category. When you make any 529 eligible purchase, simply submit your receipt and we’ll update you on how you are tracking against your coverage. We’ll also document and store your receipts for the protection period (up to 3.5 years after your purchase period) in the case of an IRS audit.
Dedicated support from our team and technology during an IRS audit
Good news - if you get audited we have your back! 529 Purchase Protection  provides you with the peace of mind that any purchases we certify as Eligible Expenses will be covered in the case that the IRS audits you and disagrees with our classification of eligible expenses. Our dedicated team will provide you with Audit Support, all expense receipts and supporting documentation needed by the IRS. If the IRS decides to impose taxes and penalties despite the documentation provided for Eligible Expenses that were covered under this service, you will be entitled to make a claim for the amount.

Choose your service level

Basic

$19
Tuition only
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Buy now
By clicking buy now, you agree to our Terms and Conditions
  • Expense Coverage*
    Tuition expenses
    Support and Guarantee
    IRS Audit support
    Tax and Penalty Guarantee for 3.5 years post Purchase Period (IRS’s general assessment period)
    10-Day Money Back Guarantee

Standard

$29
Tuition and room & board
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Buy now
By clicking buy now, you agree to our Terms and Conditions
  • Expense Coverage*
    Tuition expenses
    Room and board expenses, including on-campus or off-campus housing and meal plans
    Support and Guarantee
    Support to pre-qualify expenses prior to purchase
    IRS Audit support
    Tax and Penalty Guarantee for 3.5 years post Purchase Period (IRS’s general assessment period)
    10-Day Money Back Guarantee

Premium

$49
Tuition, room & board and non-tuition expenses
Buy now
By clicking buy now, you agree to our Terms and Conditions
  • Expense Coverage*
    Tuition expenses
    Room and board expenses, including on-campus or off-campus housing and meal plans
    Non-tuition expenses, including textbooks, laptops, internet and other supplies
    Support and Guarantee
    Support to pre-qualify expenses prior to purchase
    IRS Audit support
    Tax and Penalty Guarantee for 3.5 years post Purchase Period (IRS’s general assessment period)
    10-Day Money Back Guarantee
*Expense coverage extends up to the specific Cost of Attendance of your beneficiaries accredited Education Institution. See FAQ below for more details.

Coverage period

Our 529 Purchase Protection is designed for ease and clarity. The 'Purchase Period' is the calendar year in which you buy the policy, during which you can make and certify transactions as Eligible Expenses. Following this, you get a 'Protection Period' that covers you slightly beyond the IRS’ Assessment Statute Expiration Date. This is the period the IRS can initiate an audit (unless the IRS finds exceptions). During this period, any taxes and penalties imposed by the IRS on eligible expenses in your policy can be claimed for reimbursement. For instance, if you purchase the policy in 2024, your Purchase Period is throughout 2024, and your Protection Period extends from January 1, 2025, to June 30, 2027. This structure ensures that you have ample time to benefit from the protection, covering both immediate and future financial responsibilities related to your educational expenses.

FAQs

How do I make sure an expense will be covered by 529 Purchase Protection?
Before you buy
Step 1, refer to your coverage policy for the list of eligible expenses that are covered.
Step 2, if you’re still unsure, our team is happy to answer any questions about what is and isn’t eligible prior to making your purchase. Simply email purchaseprotection@backpack529.com

‍After you buy
After each purchase you should submit your itemized receipt to our system by emailing it through to receipts@backpack529.com. Our system will validate the expense against your policy and 529 eligibility criteria. If it is a valid expense, our system will update your account and will reply on how you are tracking against your coverage.
How does 529 Purchase Protection help me track my eligible expenses?
We will help you certify, document and track your eligible spend by category. When you make any 529 eligible purchase, simply email your receipt to receipts@backpack529.com. Our system will update your account and will reply on how you are tracking against your coverage.
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Every-time you submit a receipt we document and store that receipt. If you ever get audited by IRS, we will have all the documentation to support your case.
How do I check how much of my coverage I have used?
When you email your receipts, we will provide you with an update on how your spend is tracking against your coverage. If you have lost or can’t find the email, please reach out to purchaseprotection@backpack529.com and we will provide you an update on your coverage.
What is Cost of Attendance (COA) and what does it mean for me?
Cost of Attendance (COA) is the estimated total cost of attending college in a given year. It includes tuition and fees, books and supplies, room and board, transportation and personal expenses, and it is an official number determined by each college. Each university is responsible for publishing their COA every year, in accordance with Federal law, and is typically found on the university’s website.

529 Payment Protection leverages a university’s COA in determining the total spend covered in each of the categories of Tuition, Room & Board and non-tuition expenses. You are able to submit expenses as part of 529 Purchase Protection for each category up to the COA amount for your specific college in that specific academic/calendar year.
What do I do if I get a notice letter from the IRS about my 529 spend?
Good news - if you get audited we have your back! To initiate your 529 Audit Support, simply email the IRS Notice Letter within 60days to purchaseprotection@backpack529.com. We will then provide you with all expense receipts and supporting documentation to provide back to the IRS.
Who do I contact if I have more questions?
Our Help Center has a wealth of knowledge with articles covering many more questions about Purchase Protection. If you still have questions, you can start a chat with us here or email us at purchaseprotection@backpack529.com
Have more questions?  Start a chat with us here  or visit our Help Center.
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Backpack Payment Technologies, Inc. is a financial technology company, not a bank. Banking services are provided by OMB Bank, Member FDIC. Consult your tax professional for any tax-related questions.
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