Form 1099Q No Tax Due (Coverdell)

[zeros]

Client received form with a $11,000 distribution. If it is determined that no tax is due, must we still report it so they will know?

[mastertaxguy]

Coverdell esa reporting??

1. Our friend The Taxbook, Pp. 12-6 (right column, near the top) says no reporting is required if the distribution from a Coverdell ESA is not subject to tax.
2. Most of us would want to prepare a worksheet (usually within our software) to make the taxability determination because as we all know...
3. IRS may do a letter audit of this inevitably two or three years down the road so having a worksheet in your, and the TP's file, seems like a good idea.
4. Of course, if the distriubtion code on the 1099-Q is NOT a 1, 4 or 5 taxability of the distribution (in whole, or in part) becomes the issue.
5. Always be careful that the TP or you are not forgetting to include the 1099Q box 1 amounts in computing any education credits which may apply (and of course, those only apply to post secondary education NOT private school primary school tuition).
6. As TTB points out (pp. 12-6/12-7), one may even find a dedctible loss.

[zeros]

Room & Board

I understand that room and board can be included in the expense calculation? Correct?

[Gary2]

I understand that room and board can be included in the expense calculation? Correct?

For college students, only if enrolled at least half time, and only to the extent they don't exceed the school's allowance for R&B (or actual charges if living in school-owned housing).

For elementary and secondary school students, only if residence is required by the school. (Note that only Coverdells and not 529 plans can be used for elementary and secondary school costs.)