Right response to 1099-Q related questions

[rerrabolu]

I am on the screen "Tell us about your education plans"

The screen has two questions:

• Were you the beneficiary of Coverdell ESA
• Did you receive a form 1099-Q for distributions from a Coverdell ESA

I am the parent of the student for whose benefit I have setup and funded this ESA. How should I interpret the word "you". Does it refer to the FILER of TurboTax

• If you refers to beneficiary the right response would be NO & NO
• If you refers to beneficiary the right response would be NO & YES

When I choose NO & YES I am seeing "Less common income go up by amount of distribution".  However, I didn't see an increase in the tax amount that is due. My efforts to find an entry in the "Deductions & Credits" section that could explain this were in vain. This whole thing does not make sense.  The main feature of Coverdell ESAs is that distributions are not taxed when those funds are used for qualified expenses.

TurboTax should make clear the meaning of these terms/words so that responses are correct.

Any help in explaining this is appreciated.

Regards,

Ramesh

[SharonD007]

Please clarify if the 1099-Q has your SSN on it or if the 1099-Q has your child's SSN on it?

[rerrabolu]

The 1099-Q has my son's TIN on it.

It has my name and my son's name as well in the following manner.

• Father's Name
• FBO Childs Name

Any clarifications you can suggest is greatly apprecited.

Regards,

Ramesh

[KrisD15]

Just a bit more information to clarify please-

Do you also have the 1098-T to enter the education expense? 

[rerrabolu]

Facts:

• Coverdell ESA was set up by me (Parent) for the benefit of my son
• Received from Vanguard 1099-Q form with Distribution Code set to ONE (1)
• From 1099-Q didn't report any amount in Box 2 (Earnings) or Box 3 (Basis)
• Received 1098-T from the college my son is attending as a full-time student
• All of the withdrawals were spent on qualified expenses - tuition, books, room and board

The questions posed by TurboTax screen "Tell us about your education plans" is confusing.

Regards,

Ramesh

[AmyC]

Since the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Simply tuck it away in your tax folder. Delete the entry from the program.

Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions at IRS Publication 970, Tax Benefits for Education.

TT article  Guide to IRS Form 1099-Q: Payments from Qualified Education Programs.