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Qualified ESA rollover showing up as taxable

I've entered in my 1099-Q information in the deductions & credits section to report the ESA dollars I rolled over into a Roth IRA, which is an allowable rollover and should not be taxed. TurboTax, however, is counting this as taxable income, increasing my state and federal taxes due by nearly $2,500. I'm at a loss for what to do here -- how do I correctly report this so that TurboTax does not make the mistake of considering this taxable? 

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1 Reply
AmyC
Employee Tax Expert

Qualified ESA rollover showing up as taxable

Since the 1099-Q was not income, it should not be entered. Tuck the 1099-Q into your tax folder. IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.
 

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