Could I request help as to how I should answer the following questions: Basis in this Coverdell ESA as of Dec 31, 2022As the parent, I have contributed to this account over 15 plus yearsWithdrawals are used to fund college expenses - tuition, room and boardTotal value of this Coverdell ESA as of Dec 31, 2022Does this refer the money left in the accountIf so, why couldn't it be reported in the 1099-Q form itselfAny help in understanding and answering these questions is appreciated. Regards,Ramesh

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rerrabolu

Solved

How to answer Coverdell ESA questions

Forum|Forum|3 years ago
March 25, 2023
2 replies
0 views

Could I request help as to how I should answer the following questions:

Basis in this Coverdell ESA as of Dec 31, 2022
- As the parent, I have contributed to this account over 15 plus years
- Withdrawals are used to fund college expenses - tuition, room and board
Total value of this Coverdell ESA as of Dec 31, 2022
- Does this refer the money left in the account
- If so, why couldn't it be reported in the 1099-Q form itself

Any help in understanding and answering these questions is appreciated.

Regards,

Ramesh

Best answer by starsj828

1. Basis: Add up your Total Contributions over the 15 years and the Total amount is your BASIS.

2. Total Value of your Coverdell ESA as of 12-31-2022 - This is the TOTAL ACCUMULATED VALUE of your Coverdell Account which consists of YOUR CONTRIBUTIONS plus the INTERESTS or EARNINGS over the 15 years.

SallyJane *SJ* Lim, CFP, CLU, LUTCF

email: [email address removed]

website: SallyJaneInsurance.com

starsj828Answer

1. Basis: Add up your Total Contributions over the 15 years and the Total amount is your BASIS.

SallyJane *SJ* Lim, CFP, CLU, LUTCF

email: [email address removed]

website: SallyJaneInsurance.com

rerraboluAuthor

Thanks for taking time to answer my query. Your explanation is very helpful.

SharonD007

In addition to the information that starsj posted, I wanted to provide you a link Guide to IRS Form 1099-Q: Payments from Qualified Education Programs with additional information.

Box 1 of your Form 1099-Q reports your total withdrawals, box 2 reports the earnings from your initial investment and box 3 reports your basis in the distribution. Please refer to the TurboTax article What is IRS Form 1099-Q?

@rerrabolu

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rerraboluAuthor

I understand what boxes 2 and 3 are asking.

The question is how does one gather this information if the institution that manages the Coverdell ESA does not provide this information.

Assuming withdrawals are made to cover expenses for 4 years.

Basis for each year: Total contributions / 4
Earnings for each year: Withdrawals of each year - Basis of each year

I suspect this simple way will not fit many other scenarios, where withdrawals are made over longer terms and contributions could be happening concurrently.

Regards,

Ramesh

KrisD15

The financial institution has an obligation to report those numbers in Boxes 1,2 and3.

If you received a 1099-Q without those boxes reported, what is it reporting?

I'm sure the Account Manager could supply you with those numbers, but if the distribution was used to pay education expenses, including Room and Board, there is no need to enter the 1099-Q.

In this case, don't report the distribution and also lower the expense it was used to pay.

In other words, if you paid 10,000 in tuition and used a 6,000 distribution to pay tuition, only enter 4,000 as tuition expense (if you further need to apply expenses towards scholarships or for an Education Credit)

If it was entirely used to pay Room and Board, don't enter the distribution. Additionally Room and Board would then become irrelevant.

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