As recipient of 1099-Q with 2 beneficiaries I want to know how to enter the gross distribution, earnings and cost shown on the form when 1 of the recipients withdrew from school and used the funds withdrawn for ineligible purposes?
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Your situation is quite unique. It is clear that you are the recipient of the distributions from both accounts, this is why there is only one 1099-Q.
In TurboTax you will not be able to allocate funds from that single 1099-Q. Nevertheless, this creates an accounting scenario that is going to lead to the proper Tax Scenario. The accounting comes into play with the Qualified Education Expenses. Since you are the recipient of the distribution you are responsible for properly allocating the Qualified Education Expenses, dollar for dollar, to the distribution. The first step is determining what Qualified Education Expenses are for purposes of 529 Plans and Coverdell ESA:
Once you have accounted for all of these expenses you will first enter the information in this order:
Since you are the recipient of the distribution if the amount of Qualified Education Expenses for both of your children exceeded the amount of the distribution, none of it will be taxable. Now, if your children had each been the recipients of their distribution (you would have received 2 1099-Q forms), TurboTax would have required that you specifically allocate education expenses to offset each 1099-Q.
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