My wife is 38 and her parents forgot about an ESA account they had setup as a teen for her. They cashed it out in 2024, Vanguard wired my wife the balance of 7,800 and sent a 1099-Q form for it. The form does not have a cost basis, only an account number in box 3. We called vanguard and they said that do not have the contribution amount and that it is on the contributors to keep a record. My father-in-law stated he contributed $4,00 total to the account. When I put that number into box 3 while filling out my taxes on turbo tax, it does not reduce the tax liability and expects I pay taxes and the 10 penalty on the full amount of 7,800 instead of this amount minus the contributions which is would mean a taxable and penalty amount of 3,800. Does the cost basis not apply in this scenario because it was distributed so late or is turbo tax not getting this correct for me?
