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Category: 1099's

How do I deal with a 1099-Q Coverdell ESA distribution within the TaxSlayer program?

If the taxpayer's modified AGI is less than $110,000 ($220,000 if filing a joint return), the taxpayer may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed.

Form 1099-Q information can be entered within your TaxSlayer account, and we will automatically figure the taxable portion (if any) of the earnings from your distribution. When entering your 1099-Q information, be sure to have the total that you paid for qualified education expenses on hand.

To enter in your account, from the Your Account tab select: Continue Return > Income Menu > Enter Myself > Other Income > Payments from Qualified Education Programs.


What effect will this have on your return?

If your qualified education expenses are equal to the distribution, generally none of your earnings will be taxable. As long as your distribution was spent entirely for education expenses, the IRS will generally not tax the earnings.


If the expenses exceed the distribution amount, the difference can be claimed as an education credit or tuition and fees adjustment.


If the distribution exceeded the qualified expenses, then part of the earnings will be taxable. The entire distribution will not be subject to tax, but a percentage of the earnings may be. For more information, see Publication 970 to figure the taxable amount, or to read about other tax benefits for education.


For additional information on 1099-Q
Payments from Qualified Education Programs
How do I report Qualifying Education Expenses paid with a 1099-Q Distribution
Examples of How to Report Qualified Education Expenses involved with a 1099-Q