Now turning to my MI return -
Per the discussion above, the excess distribution has been spread across our return and our son's return.
The excess distribution reported on our return is attributable to earnings and included in AGI, the starting point for MI's income tax. However, the instructions or Line 8 of MI's Schedule 1 say in part: "Add, to the extent not included in AGI, the amount of money withdrawn in the tax year from ... [an MESP account] ... if the withdrawal was not a qualified withdrawal ... You may first exclude any amount that represents a return of contributions for which no deduction was claimed in any prior tax year." I interpret this to mean that I have to add back any excess distribution attributable to the basis. (Which makes sense, since MI allows a subtraction for contributions to an MESP; if I use the funds for non-qualified expenses it's only right they should recapture the tax from me.)
I've gone through the interview in TurboTax, entering the 1099-Q and our allocated amount from the 1098-T, and am confident that the numbers TurboTax enters on my federal return are correct. However, when I inspect my state return using "Forms" view, there is no entry on Line 8 of the Schedule 1. Shouldn't there be? Is this a TurboTax error or a user error of some sort?
