I just had to do this myself. Some trustees don't have the basis. They only provide you with the end-of-year value and let you calculate it, leaving boxes 2 and 3 empty on your 1099-Q. You have to know the ending account balance on Dec 31 of each year that you took a distribution, and the amount of the distributions each year. IRS Publication 970 almost has it. Note that if you took no distributions, then your basis only increases with the amount of your contribution(s). If you made no contributions, then it stays the same. Here are the steps:
Multiply the total amount distributed by a fraction. The numerator (top part) is the basis (contributions not previously distributed) at the end of the previous year, plus total contributions for that year, and the denominator (bottom part) is the value (balance) of the account at the end of the year plus the amount distributed during the year. This is the amount of basis included in the distribution(s). (The amount that should have been in 1099-Q box 3.)
Subtract the amount figured in (1) from the total amount distributed for that year. The result is the amount of earnings included in the distribution(s). (The amount that should have been in 1099-Q box 2.)
- Your new basis for NEXT YEAR is the the basis for the prior year, adding your contribution(s), then subtracting the basis of your distribution(s) which is the amount you figured in (1).
EXAMPLE:
You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2020. There was a $100 contribution in 2020. This is your first distribution from the account, so your basis in the account on December 31, 2019, was $1,500. The value (balance) of your account on December 31, 2020, was $1050.
Your Distribution was: $850.
The amount of basis in the distribution was: 850 x (1500+100) / (1050+850) = 715.79
The amount of earnings in the distribution was: 850-715,79 = 134.21
Your new basis for 2021 is: 1500+100-715.79=884.21
