Last updated: 03/01/2024
Our 529 Eligibility Guarantee (the “Guarantee”) has been designed to alleviate the burden and anxiety associated with figuring out what qualifies as an eligible 529 expense. The below terms and conditions set out how to benefit from the Guarantee and what you get from it.
GUARANTEE
The 529 Eligibility Guarantee (the “Guarantee”) is us standing behind our certification of what is an eligible expense and what is not an eligible expense for 529 use.
The Guarantee means two things:
COVERED TAXES AND PENALTIES
The taxes and penalties covered by the Guarantee (”Covered Taxes and Penalties”) are eligible for reimbursement via our claims process. These include, but are not limited to, federal and state capital gains and/or income tax on investment earnings, 10% penalty on investment earnings, and any reimbursement of state tax deductions taken for contributions (only applicable in certain states that provide tax deduction programs for 529 contributions).
The imposition of these Covered Taxes and Penalties must be a direct result of using 529 funds from a 529 Account on expenses that we deemed eligible, but the IRS deemed not to be qualified education expenses under the IRS Publication 970. Backpack will provide reimbursement of Covered Taxes and Penalties to you as long as you satisfy the conditions set out in these Terms and Conditions and are able to provide the appropriate and required documentation as referred to in the Procedures section of this document.
TIME PERIODS
There are two important time periods to understand with regard to the Service; the Purchase Period (”Purchase Period”) and the Protection Period (”Protection Period”).
The Service only provides coverage for Eligible Expenses made within the Purchase Period. The Purchase Period is the full calendar year in which you purchased the Service.
The Protection Period is the time period in which the Guarantee is valid. The Guarantee will expire three and a half years (or 42 months) after the Purchase Period. The Protection Period is approximately two months more than the Assessment Statute Expiration Date (ASED). 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. The date which is used to assess whether a transaction is inside or outside the Protection Period will be the date of the first IRS Notice Letter which details the eligible expenses you submitted as part of the Service. You are required to submit an IRS Notice Letter to us within 60 days of receipt.
Note that the Guarantee will not extend in the case the IRS audits you outside of the ASED because of an exception to the 3-year assessment date or a suspension of the time limit. You can read more about the ASED and reasons why the IRS may impose an exception or suspension of the limit here.
PROCEDURES
Below are links to the important procedures you will need to follow to submit and certify expenses and make claims for reimbursement of Covered Taxes and Penalties under our Guarantee.
