Coverdell ESA excess accumulation

[Rapid Robert]

33-yr old receives 1099-Q for a forgotten Coverdell, total distribution of about $2,300, no basis shown. I figure this must have been a $2K after-tax contribution once upon a time, plus earnings. Reasonable? Also, since Coverdells are required to be distributed by beneficiary age 30, has anyone seen an excess accumulation tax on that?

No qualified education expenses, fully expect to pay tax and penalty on amount over basis.

[Burke]

I would not guess at basis. It is probably less than that, given its age. Somebody must remember what they put in it. I recently had two of these distributions. The custodian furnished the orginial basis and the earnings on a separate statement. They know what it is.

[MAJ]

1099-Q - Bothering ME and I don't need this right now...

Details:
1099-Q - Senior - College.

1: Gross Distribution: $3,674.02
2: Earnings $1,345.27
3: Basis: $2,2328.75
5: QTP: STATE
Dist Code: 1

Out of Pocket {Books-etc} $ 5,100 {non 1098-T}

Tuition (1098-T)
2: Amounts Billed: $13,333.00
5: Scholarships $21,381.00

7: Checked 8: Checked


Other Info:
W2: $ 9,029
13: Cap Gain $ 2,151
21: Other Income $ 1,345 {1099-Q Gains}

QUESTION {Finally}: WHy taxable gains if enough tuition and out-of-pocket?
Regardless of who claims the Tuition {parents/son} he shows this as taxable income.
I thought the point was - it was not taxable if used for education purposes.

Thanks..

[FEDUKE404]

One possibility

Are you forgetting that other expenses, such as room & board, can be used to offset potential taxable income from Coverdell distributions?

(Your tax software should have a worksheet to sort everything out.)

But you do have a lot of numbers rattling around, to include a large scholarship, so it's tough to predict what's going to happen from here.

Just a thought. . .

Oh yes: From the Form 1098-T etc numbers you provided, I would not be greatly surprised if the student actually has some taxable scholarship income out there. Such gets reported on line 7 of Form 1040 (wages line, with IRS code) whereas taxable Coverdell income goes to line 21 of Form 1040 (miscellaneous income).

##########

Also, potential taxable income from a Form 1099-Q goes to the beneficiary as shown on said document. Be sure you didn't take a software detour on that aspect! I've had several instances where the student gets the 529/Coverdell taxable income but the parents continue to get the exemption and allowable college tax credits for the student.

FE

[taxmom34]

you show amount on 1098 for billing, did you ignore this and get actual amounts paid from students account?

[Clemrick]

Don't forget Kiddie Tax!!

Details:

Other Info:
W2: $ 9,029
13: Cap Gain $ 2,151
21: Other Income $ 1,345 {1099-Q Gains}

Thanks..

If you work through all the numbers and find that there is taxable scholarship money, don't forget to add that to the Cap Gain of $2,151 and fill out 8615 for kiddie tax.

[Burke]

Details:
Tuition (1098-T)
2: Amounts Billed: $13,333.00

That amount doesn't mean squat, as you probably already know. You have to find out what he paid, which would include loans. Need a transcript from the school.

Also, on the Coverdell distribution, you have to figure separately the taxable amount to report on Line 21, and if your software does not have a worksheet for this, (mine did not), use the one in Pub 970 the IRS provides. If it comes out zero, you report "0."

[MAJ]

The funny part is...

Mom works for the Monmouth University. Tuition is a perk of the job. So they pay like $175 per semester to register the kid and that's it.

Funny part is...
The kids grand-pop left him $80k in a trust for college. {and he goes Tuition Free}.

I'd gladly pay the tax on $10k to not pay the Tuition - one year - nevermind 4. I have 2 in college now- Sr./Jr - Pre-Med / Teaching/Administration.
Two more in high school...

Ok.. Thanks for all the help -

Burke- 970 - gotcha - thx

STRESSED TODAY FOR SOME REASON!!!!! aljgfalwhjeto2h4t6nvb daf q39y461096780*E)*