AmyC
Employee Tax Expert

Retirement tax questions

Many older Coverdell ESA's do not track the basis, it was on your shoulders for years and you were able to send numbers when needed. There have been a lot of nonqualified errors so the program is trying to correct the issue for those not as savvy as you. You have two options:

1. You can truthfully enter the correct numbers from your records. Box 3 is how much you put in through the years towards this distribution. Box 2 is the earnings or difference between the basis and distribution.

2. The IRS instructions for Form 1099-Q, About Publication 970, Tax Benefits for Education state: "Nontaxable distributions from CESAs... are not required to be reported on your income tax return."

 

I understand you want to continue tracking with your return. So using your numbers may be the best option for you.

@j0mike1993

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