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Level 3
posted Apr 9, 2022 11:58:48 AM

1099Q - need to report to avoid amending 2021 return?

Hi Experts,

 

I contributed more on the Coverdell ESA account than I was allowed in 2021.  I got that removed before 5/31/22.  There are earnings from the over contribution.  I will be getting the 1099Q in 2023.  To avoid amending tax return for 2021 when I receive the 1099Q in 2023, do I need to enter the earnings on my 2021 tax return (not yet file, waiting on this part)?  If so which portion in Turbo tax I should enter this earning information? Please kindly advise.

 

Thank you for the assistance!

0 4 457
4 Replies
Expert Alumni
Apr 9, 2022 1:41:43 PM

Publication 970, Tax Benefits for Education page 44 shows your options. Since you are taking the interest earned before June 1, you will not have excise tax on that amount. If you reduce your 2022 contributions by the amount of overage, you will eliminate all overage and penalty. You only pay tax on the interest earned.

 

  • TY 2022 entry- You will receive the 1099-Q in 2023 for TY 2022 with code 3 on the 1099-Q  for excess contributions plus earnings taxable in 2021. No amend is necessary due to the coding.
  • TY 2021 entry- If you want to enter it this year, you would enter a fake 1099-Q,  code 2, to show 2021 excess earnings and basis.

 

Since I like to keep all forms matching and straight forward, I would not enter the excess this year without a form. The form will come next year and match IRS records and will be entered on 1099-Q. It goes to your sch 1, line 8z.

Level 3
Apr 9, 2022 7:13:32 PM

Thank you so much!  So if I don't enter the "fake" 1099Q in my tax return 2021, I am afraid when I do tax return 2022, I will have to amend the tax return 2021 for the earnings I distributed in 2022 for 2021 (even only couple hundreds).   

 

Would this be a concern or the earnings withdrawn won't trigger the amendment for 2021 since withdrawn in 2022? Kindly clarify.  

 

Thank you so much for the assistance!

Expert Alumni
Apr 11, 2022 11:17:28 AM

Why don't you zip over to  Federal Deductions and Credits section. Scroll down to education and go into the 1099-Q entry area. Mark yourself as recipient and student then when you get to the entry screen, scroll down to line 6, distribution code and read the options. I think seeing it makes more sense. There are two choices listed, for the current year's tax return and the prior year.

 

 

Level 3
Apr 11, 2022 11:11:57 PM

Hi AmyC,

 

Thank you and I just tried on Turbotax.  I see that the option will be for the 2 years.  So when I do tax return on next year for 2022, I will still able to choose the taxable year 2021 and pay tax accordingly.  No amendment would be needed for tax year 2021 then.

 

Thank you so much for the assistance!