TurboTax requires boxes 2 and 3 of Form 1099-Q for a non-qualified 529 distribution to determine the taxable portion of your withdrawal. Box 2 (earnings) and Box 3 (basis/contributions) are needed to calculate how much of the distribution is taxable income, as only the earnings portion is generally taxable and subject to a 10% penalty.
- Box 2 (Earnings): This amount represents the profit made in the account. When a withdrawal is non-qualified, this amount is considered taxable income.
- Box 3 (Basis/Contributions): This is the amount you originally contributed. This portion is not taxed because you already paid taxes on that money.
- Non-Qualified Penalty: For non-qualified distributions, the earnings portion (Box 2) is taxable and potentially subject to a 10% additional tax on Schedule 2 (Form 1040
Here's more detailed info on Form 1099-Q.
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