How to enter Coverdell ESA form

[rerrabolu]

Request help in filing out Coverdell ESA form in TT.

My 1099-Q reports a follows:

• Gross distribution (Box 1):  $$$$$
• Earnings (Box 2): Empty
• Basis (Box 3): Account number

How do I translate this into the ESA form in TT?

Regards,

Ramesh

[SharonD007 · Accepted solution]

Form 1099-Q only needs to be reported on the tax return of the person whose SSN is on the form (it’s either the beneficiary of the account or the account owner) if the withdrawal is more than the tuition paid in Box 1 of the 1098-T plus other adjusted qualified educational expenses.  In that case, the earnings on the excess distribution would be taxable income.  To find out what are qualified educational expenses, please review the Guide to Tax Form 1098-T: Tuition Statement.

First, determine if the Form 1099-Q needs to be reported on the tax return by comparing the withdrawal with the tuition paid on the 1098-T added to other qualified educational expenses.  Please review the TurboTax articles Guide to IRS Form 1099-Q: Payments from Qualified Education Programs  and What is IRS Form 1099-Q? for further details.

Secondly, enter the 1099-Q into TurboTax if the withdrawal exceeds the educational expenses by following the directions below.

If you are using TurboTax Online:

1. Launch TurboTax
2. In the search box type: 1099-Q and select the Jump to link
3. Follow the screens to enter your information.

If you are using TurboTax CD/Download:

1. Launch TurboTax
2. Select Federal Taxes and then select Deductions & Credits
3. Select I'll choose what I work on
4. Scroll down to Education, select Start or Update next to ESA and 529 qualified tuition programs (Form 1099-Q)
5. Follow the screens to enter your information.

[rerrabolu]

Thanks for taking time to answer.

I am unable to connect your response in how I fill out the TurboTax form i.e. enter the right values in the two boxes (Earnings & Basis) presented by TurboTax.

For example one what should one report as Basis for each of the years money is withdrawn for qualified expenses. Consider the following scenario. Parent puts 15 * 2000 = 30,000 into ESA. Money has grown to 100,000. Parent withdraws 25,000 for each of the 4 years. How will the parent report Basis for each of the years?

Could you elaborate on this aspect

Regards,

Ramesh

[rerrabolu]

Thanks for taking the time to answer my query. Another way one can try to understand your response is:

• Scenario 1: Withdrawal from Coverdell ESA is LESS THAN or EQUAL to the amount used for qualified expenses
  • In this case there is no need to report 1099-Q and 1099-T forms i.e. not reference them in TurboTax
• Scenario 2: Withdrawal from Coverdell ESA is MORE than the amount used for qualified expenses
  • In this case the excess amount must be reported and it should be on the tax return of the RECIPIENT

In my case it is scenario 1 that is binding. As suggested I will simply ignore entering/referencing forms 1099-Q and 1099-T

Regards,

Ramesh