Question

Filing or Grandkids' ESA Account Withdrawls.

Forum|Forum|6 years ago
February 13, 2020
1 reply
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I have contributed to my grandchildren in an ESA account. One grandchild withdrew her money last year. How do we file that withdrawl? She is a minor and does not work, so she would not normally be filing a return without it. Can I just file it with my taxes since I'm the controller of the account?

Hal_Al

Employee

For 529 (and ESA) plans, there is an “owner” (usually the parent, but the garndprent in this case), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient".

The distribution will be reported on IRS form 1099-Q.
The 1099-Q gets reported on the recipient's return. The recipient's name & SS# will be on the 1099-Q. So, it is not optional which return you put it on.

Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. It will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.