1099-Q due to withdrawal of excess contributions.

[Froth6]

We accidently contributed to an ESA for our child when over the income limit for the year. We withdrew the contribution and the associated earnings in January of the following year to avoid the penalty and the money was transferred directly into a 529 plan for the same child. We then received a 1099-Q in the child's name and SSN. Are the earnings still taxable even though they went straight into a 529 plan? If so, how do we report them on our tax return? Our child is less than 10 so doesn't have a tax return.

[Hal_Al]

Q. Are the earnings still taxable even though they went straight into a 529 plan?

A. Yes. Technically, a rollover is not permitted, since the ESA was not permitted. So, you had a distribution* from the ESA and a separate contribution to the 529. *Technically a contribution return. 

Q. If so, how do we report them on our tax return?

A. That's not allowed since the 1099-Q was in the child's name (it probably shouldn't have been). 

If  the earnings (box 2 of the 1099-Q) were  less than $1100, and the child has no other income, the 1099-Q does not need to be reported, because the child does not have enough total income to be required to file a tax return.  Fuhgeddaboudit. 
 

[Froth6]

Thanks. Much appreciated