Retirement tax questions

Do you work for Turbo Tax? My information is coming from pub 970 worksheet 6-3 (pages 47-48). Your response about the 529 applies the same to the Coverdell. Our oldest son was taxed on excess distributions (after taking an education credit) because he was living at home, and I didn't account for his living expenses from cost of attendance, so he had less expenses to deduct. Turbo Tax has taxed us on excess distributions a few times.

Up until this year Turbo Tax has had me input our children's 1099Q's, and calculated the worksheets to figure out if we have excess distributions or not (if you are taking an education credit and didn't account for the expenses the credit uses, you may have excess distributions that are TAXABLE). You have to account for the expenses the education credit uses in addition to deducting your expenses from your distribution - there is no double dipping on expenses. Turbo tax has also calculated the Coverdell's basis from year to year, and I need them to continue doing that, so I don't pay tax on the basis.  You wrote if over, enter the Q and pay tax on excess. This is my problem!!! Turbo tax is telling me I don't need to input my children's 1099Q's. I receive a message Great news! You don't need to report this form, BUT YES I DO. This is the only reason I am on this chat is to get someone to fix turbo tax skipping1099Qs. When I try to work around this error by stating I'm the recipient (which I am not - it changes the tax), Turbo Tax is requiring input from 1099Q's box 2 and 3, and Coverdell's 2 and 3 are always blank because the earnings and basis are calculated yearly on you tax return worksheets. Your financial institution does not know you basis. Without inputting box 2 and 3 I can't proceed or do I want to because I'm not the recipient. NO ONE should be skipping worksheet 6-3 if they are taking the education credit

If I wanted to do all these calculations myself, I wouldn't purchase Turbo Tax. Someone please HELP. I know I have excess distributions after taking the education credit, and right now I have no way to add my children's 1099Q's to my tax return to PAY THE TAX because Turbo Tax is SKIPPING! I cannot proceed without inputting!!! Or give me a refund, and I will take my business somewhere else.

Below Publication 970 Worksheet 6-3

Coverdell ESA—Taxable Distributions and Basis
Complete Part I, lines A through H, on only one worksheet.
Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs.
Complete Part III, the Summary (line 16), on only one worksheet.

Caution. If you had a distribution from a qualified tuition program (QTP), see Coordination With Qualified Tuition Program (QTP)
Distributions.
Part I. Qualified Education Expenses (Complete for total expenses.)
A. Enter your total qualified education expenses for 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.
B. Enter those qualified education expenses paid for with tax-free
educational assistance (for example, tax-free scholarships, veterans’
educational benefits, Pell grants, employer-provided educational
assistance) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.
C. Enter those qualified higher education expenses deducted on
Schedule C (Form 1040), Schedule F (Form 1040), or Schedule 1 (Form
1040), line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.
D. Enter those qualified higher education expenses on which
an American opportunity or lifetime learning credit was based . . . . . . . D.
E. Add lines B, C, and D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.
F. Subtract line E from line A. This is your AQEE for 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F.
G. Enter your total distributions from all Coverdell ESAs during 2025. Don’t include rollovers
or the return of excess contributions. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.
H. Divide line F by line G. Enter the result as a decimal (rounded to at least 3 places). If the
result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H. .
Part II. Taxable Distributions and Basis (Complete separately for each account.)
1. Enter the amount contributed to this Coverdell ESA for 2025, including contributions made for 2025
from January 1, 2026, through the due date (not including extensions) for filing your 2025 return. Don’t
include rollovers or the return of excess contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
2. Enter your basis in this Coverdell ESA as of December 31, 2024. See instructions . . . . . . . . . . . . . . . 2.
3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4. Enter the total distributions from this Coverdell ESA during 2025. Don’t include rollovers
or the return of excess contributions. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
5. Multiply line 4 by line H. This is the amount of AQEE attributable to this
Coverdell ESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
6. Subtract line 5 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
7. Enter the total value of this Coverdell ESA as of December 31, 2025,
plus any outstanding rollovers. See instructions . . . . . . . . . . . . . . . . . . 7.
8. Add lines 4 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
9. Divide line 3 by line 8. Enter the result as a decimal (rounded to at least
3 places). If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . 9. .
10. Multiply line 4 by line 9. This is the amount of basis allocated to your distributions, and is tax
free . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
Note. If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15.
11. Subtract line 10 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
12. Divide line 5 by line 4. Enter the result as a decimal (rounded to
at least 3 places). If the result is 1.000 or more, enter 1.000 . . . . . . . . . 12. .
13. Multiply line 11 by line 12. This is the amount of qualified education expenses allocated to your
distributions, and is tax free . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
14. Subtract line 13 from line 11. This is the portion of the distributions from this Coverdell ESA in
2025 that you must include in income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.
15. Subtract line 10 from line 3. This is your basis in this Coverdell ESA as of December
31, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
Part III. Summary (Complete only once.)
16. Taxable amount. Add together all amounts on line 14 for all your Coverdell ESAs. Enter here
and include on Schedule 1 (Form 1040), line 8z, listing the type and amount of income . . . . . . . . . 16.
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