Question

Coverdell ESA and Dependent Earnings

Forum|Forum|4 years ago
February 12, 2022
1 reply
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My son is on my taxes as a dependent.

He received a 1099-Q with $4000 Gross Distribution (100% directly used to pay for college) and $3014 Earnings

Me worked a Summer job and made $4489 Gross

Question 1: In TT deductions, it asks "were you beneficiary of a Coverdell ESA"

Do I check "No", as my son is the beneficiary or is the "you" meaning all on the tax return and I check "Yes"?

Likewise

Question 2: When it asks, "Did you receive a Form 1099-Q for distributions of a Coverdell ESA", does it mean is my name on the form or does it mean a collective "you" and I check "yes' as he is listed as a dependent?

Question 3: Does he need to file a Tax return in his name?

The Help in TT is not clear. Thanks

J

JillS56

It depends. The 1099-Q is not reported on the tax return unless the amount of the 1099-Q exceeds the adjusted qualified education expenses. If the amount exceeds the qualified education expenses the excess must be reported as income on the tax return. Your adjusted expenses are equal to the total of your qualified education expenses minus other tax-free assistance you receive, such as scholarships and Pell grants. You have indicated that 100% of the distributed amount of $4,000 was used to pay for college. Since the $4,000 is used for college expenses then it does not need to be reported.

If there is an excess of the amount on the 1099-Q and the 1099-Q is in your son's name, you do not need to report it on your return. The excess would be treated as income on his return. There would be a 10% penalty on the excess since it was not used for qualified education expenses.

Guide to IRS Form 1099-Q