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Turbotax is not handling 1099-Q correctly
Facts:
- 20 year old college student
- Received 1098-T from college, let the amount be T
- Received W2 for work during 2022, let the amount be I
- Received 1099-Q as beneficiary of Coverdell ESA, let the amount be D
- 1099-Q came from Vanguard
- Boxes 2 and 3 are empty
- There is one box with Fair Market Value, let the amount be F
- Let total cash contributions to ESA be C
- Let portfolio value of ESA on Dec 31, 2021 be P21
- Let portfolio value of ESA on Dec 31, 2022 be P22
Observations:
- When I report the Basis of ESA as C my income is reported higher than W2
- The increase is D - C
I was advised to report my basis as of Dec 31, 2021 as total cash contributions to ESA. Both TurboTax and Advise can't be right. So what is the right thing to put in the question "Basis of ESA as of Dec 31, 2021"
Isn't the purpose of Coverdell to allow tax free earnings for qualified expenses. What am I missing.
Regards,
Ramesh
March 27, 2023
1:36 AM