1099Q distribution states does not add up but it does?

[MarilynG1]

If your 1099-Q distribution was entirely used for qualified education expenses (including room and board), you don't need to enter it in TurboTax.  Keep records of what expenses were paid with the distribution.

Here's more detailed info on Form 1099-Q.

@august051981 

[j0mike1993]

Even if you used your ESA distribution for education expenses, you should still enter your 1099Q with expenses especially if you’re receiving any education credit. Turbo Tax calculates your cost basis and earned income every year. You will eventually have to go back and figure out. I do not recommend skipping this step. Your financial institution does not report those amounts on your 1099Q, you get them from your tax return. Years ago turbo tax told me I didn’t have to enter 1099Q since I used distribution for education expenses. When I rolled over, I had to go back and recalculate. 

[MarilynG1]

If you rolled over your some or all of your balance in a 529 plan, your financial institution should be able to tell you your earnings, which is the only amount that may be taxable.

They should also have records of your contributions made (if you don't), which is your Cost Basis.  Box 2 (earnings) and Box 3 (Cost Basis) should add up to Box 1 (Distribution) amounts.

Here's more detailed info on Form 1099-Q.

@j0mike1993

[j0mike1993]

I have been receiving 1099Q’s for distributions for education expenses for over a decade and they have NEVER had an amount for box 2 and 3. In the fall I had to roll one over because my son was turning 30. I researched with Vanguard for hours, and the final answer is they don’t keep track of basis or earnings. All my funds (4 kids) basis’ are calculated on our tax return and forwarded to the next year’s return. The calculation is taken from publication 970 and factors in expenses + taxable amount. There is no way the financial institution would have access to your basis without you annually notifying them. That is why my 1099Q’s box 2 and 3 have always been blank. After rolling over ESA, I had to write a letter to give them my basis from my taxes. Turbo Tax needs to remove the mandatory input for boxes 2 & 3 because I can’t proceed without inputting. I thought I could probably figure out since I’ve been doing my taxes for years, but that’s why I buy Turbo Tax, so they can do the calculations. I’m a little concerned to put in an amount that isn’t on my 1099Q.  

[AmyC]

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

[j0mike1993]

I love your response of not adding the 1099Q's for my 3 dependent children (which Turbo Tax will not let me add 1099Q's if I select the recipient and beneficiary are dependents. I've been receiving the message Great news! You don't need to report this form {I do they are my dependents on my return}, so I've been having to update their school expenses using the forms option). I never liked how the taxman figured out our Coverdell basis, and am fine deciding myself. 

Unfortunately, I see 2 of my children have access distributions after receiving the American Opportunity credit of $2,500. When you are also receiving education credits, you can't figure out you have excess distributions without entering the 1099Q's. Are you telling me I don't have to pay the tax on my access distributions? When I read pub 970, it sounded like I would have to because there is no double dipping on expenses. If you don't enter the 1099Q, you will not see the excess distributions when taking education credits (someone really needs to fix this).