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Irs Govefile

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Irs Govefile

Irs govefile Index A Acknowledgment of contributions, Acknowledgment of Charitable Contributions of $250 or More Adverse determination, Adverse determination. Irs govefile Affordable Care Act Hospitals, What's New, New Requirements for section 501(c)(3) Hospitals Under the Affordable Care Act. Irs govefile Aged, home for, Home for the aged. Irs govefile Agricultural organization, Agricultural and Horticultural Organizations Airport, Other organizations. Irs govefile Alumni association, Alumni association. Irs govefile Amateur athletic organizations, Amateur Athletic Organizations Animals, prevention of cruelty to, Prevention of Cruelty to Children or Animals Appeal procedures, Appeal Procedures Application procedures, Application Procedures, Required Inclusions Bylaws, Bylaws. Irs govefile Conformed copy, Conformed copy. Irs govefile Description of activities, Description of activities. Irs govefile Employer identification number, Required Inclusions Financial data, Financial data. Irs govefile Organizing documents, Organizing documents. Irs govefile Aquatic resources, Agricultural and Horticultural Organizations Articles of organization, Articles of Organization Assistance (see Tax help) Athletic organization, Athletic organization. Irs govefile , Amateur Athletic Organizations Attorney's fees, Acceptance of attorneys' fees. Irs govefile Attribution, special rules, Special rules of attribution. Irs govefile B Black lung benefit trust, 501(c)(21) - Black Lung Benefit Trusts Board of trade, Board of trade. Irs govefile Bureau defined, Bureau defined. Irs govefile Burial benefit insurance, Burial and funeral benefit insurance organization. Irs govefile Business income, unrelated, Unrelated Business Income Tax Return Business league, 501(c)(6) - Business Leagues, etc. Irs govefile C Cemetery company, 501(c)(13) - Cemetery Companies Chamber of commerce, Chamber of commerce. Irs govefile Change in legal structure, Organizational Changes and Exempt Status Charitable contributions, Acknowledgment of Charitable Contributions of $250 or More, Contributions to 501(c)(3) Organizations Charitable organization, Section 501(c)(3) Organizations, Charitable Organizations Charitable risk pools, Charitable Risk Pools Child care organization, Child care organizations. Irs govefile Children, prevention of cruelty to, Prevention of Cruelty to Children or Animals Church, Churches. Irs govefile Integrated auxiliaries, Integrated auxiliaries. Irs govefile Civic leagues, 501(c)(4) - Civic Leagues and Social Welfare Organizations Clinic, Clinic. Irs govefile CO-OP Health Insurance Issuers, 501(c)(29) - CO-OP Health Insurance Issuers College bookstore, restaurant, College book stores, cafeterias, restaurants, etc. Irs govefile Comments, Comments and suggestions. Irs govefile Community association, Other organizations. Irs govefile Community nursing bureau, Community nursing bureau. Irs govefile Community trust, Community Trusts Contributions, charitable, Acknowledgment of Charitable Contributions of $250 or More, Contributions to 501(c)(3) Organizations Court appeals, Appeal to Courts Credit union, 501(c)(14) - Credit Unions and Other Mutual Financial Organizations D Determination letter, Rulings and Determination Letters Disclosures, required, Disclosure of Quid Pro Quo Contributions Dues used for lobbying, Dues Used for Lobbying or Political Activities Nondeductible contributions, Solicitation of Nondeductible Contributions Quid pro quo contributions, Disclosure of Quid Pro Quo Contributions Services available from government, Penalties. Irs govefile Dispositions of donated property, Donee Information Return Disqualified persons, Disqualified persons. Irs govefile Domestic fraternal society, Domestic Fraternal Societies (501(c)(10)) Donor advised funds Excess benefit transaction, Donor advised fund transactions occurring after August 17, 2006. Irs govefile Dues used for political or legislative activities, Dues Used for Lobbying or Political Activities, Deduction not allowed for dues used for political or legislative activities. Irs govefile E Educational organizations, Educational Organizations, Educational organizations. Irs govefile Employees' association, 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations Employment taxes, Employment Tax Returns Endowment fund, Endowment funds. Irs govefile Estimated tax, Estimated tax. Irs govefile Excess benefit transaction, Excess Benefit Transaction, Supporting organization transactions occurring after July 25, 2006. Irs govefile Disqualified person, Tax on Disqualified Persons, Disqualified Person Controlled entity, 35%, 35% controlled entity. Irs govefile Family members, Family members. Irs govefile Substantial influence, Persons not considered to have substantial influence. Irs govefile Disregarded benefits, Disregarded benefits. Irs govefile Donor advised funds, Donor advised fund transactions occurring after August 17, 2006. Irs govefile , Exception. Irs govefile Excise tax, Excise tax on excess benefit transactions. Irs govefile Initial contracts, Special Exception for Initial Contracts Reasonable compensation, Reasonable Compensation. Irs govefile Rebuttable presumption, Rebuttable presumption that a transaction is not an excess benefit transaction. Irs govefile Excise tax Black lung benefit trust, Excise taxes. Irs govefile Lobbying expenditures, Tax on excess expenditures to influence legislation. Irs govefile , Tax on disqualifying lobbying expenditures. Irs govefile Political expenditures, Excise taxes on political expenditures. Irs govefile Private foundations, Excise taxes on private foundations. Irs govefile , Excise Taxes on Private Foundations Exempt function, Political Organization Income Tax Return Exempt purposes, Section 501(c)(3) Organizations Exemption for terrorist organization, Non-exemption for terrorist organizations. Irs govefile Extensions of time, Extensions of time for filing. Irs govefile F Facts and circumstances test, Facts and circumstances test. Irs govefile Fair market value, estimate of, Good faith estimate of fair market value (FMV). Irs govefile Filing requirements, Annual Information Returns Annual information returns, Annual Information Returns Donee information return, Donee Information Return Due date, Political Organization Income Tax Return Employment tax, Employment Tax Returns Excise tax, Excise taxes on private foundations. Irs govefile , Excise Taxes on Private Foundations Political organization, Political Organization Income Tax Return Private foundations, Form 990-PF Unrelated business income, Unrelated Business Income Tax Return Form 990-N, Annual Electronic Filing Requirement for Small Tax-Exempt Organizations Forms, Forms Required 1023, Forms Required, Administrative Remedies, 270-day period. Irs govefile , Information required for subordinate organizations. Irs govefile , Annual Information Return, Form 1023. Irs govefile , Organizations Not Required To File Form 1023, Private Schools, When to file application. Irs govefile , Lobbying Expenditures, Volunteer fire companies. Irs govefile 1024, Forms Required, Application made under wrong paragraph of section 501(c). Irs govefile , Annual Information Return, 501(c)(4) - Civic Leagues and Social Welfare Organizations, 501(c)(6) - Business Leagues, etc. Irs govefile , 501(c)(7) - Social and Recreation Clubs, 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies, Fraternal Beneficiary Societies (501(c)(8)), Domestic Fraternal Societies (501(c)(10)), Local Employees' Associations (501(c)(4)), Voluntary Employees' Beneficiary Associations (501(c)(9)), Supplemental Unemployment Benefit Trusts (501(c)(17)), 501(c)(13) - Cemetery Companies, 501(c)(19) - Veterans' Organizations, 501(c)(20) - Group Legal Services Plan Organizations, 501(c)(2) - Title-Holding Corporations for Single Parent Corporations, 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent Corporations 1040, Effect on employees. Irs govefile 1065, Annual Information Returns 1120–POL, Political Organization Income Tax Return 1128, Central organizations. Irs govefile 2848, Power of attorney. Irs govefile , Representation. Irs govefile 4720, Tax on excess expenditures to influence legislation. Irs govefile 5578, Certification. Irs govefile 5768, Making the election. Irs govefile 6069, Tax treatment of donations. Irs govefile 8274, FICA tax exemption election. Irs govefile 8282, Dispositions of donated property. Irs govefile 8283, Form 8283. Irs govefile 8300, Report of Cash Received 8718, Forms Required, Power of attorney. Irs govefile 8821, Representation. Irs govefile 8871, Reporting Requirements for a Political Organization, Annual Information Return 8872, Reporting Requirements for a Political Organization, Annual Information Return 990, Keeping the Group Exemption Letter in Force, Forms 990 and 990-EZ, Annual Information Return, Making the election. Irs govefile 990-BL, Annual Information Returns, 990-EZ, Forms 990 and 990-EZ, Form 990-EZ. Irs govefile 990-PF, Form 990-PF, Excise taxes on private foundations. Irs govefile , Excise Taxes on Private Foundations 990-T, Unrelated Business Income Tax Return SS-4, Required Inclusions, Employer identification number. Irs govefile W–2, Revoking the election. Irs govefile Fraternal beneficiary society, Fraternal Beneficiary Societies (501(c)(8)) Fraternal societies, Organizations subject to requirements. Irs govefile , 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies Free tax services, Free help with your tax return. Irs govefile Funeral benefit insurance, Burial and funeral benefit insurance organization. Irs govefile G Gifts and contributions, public charity, Gifts, contributions, and grants distinguished from gross receipts. Irs govefile Good faith determinations, What's New, New organization. Irs govefile Governmental unit, Governmental units. Irs govefile Grant Distinguished from gross receipts, Grants. Irs govefile Exclusion for unusual grant, Unusual grants. Irs govefile , Unusual grants. Irs govefile From public charity, Grants from public charities. Irs govefile , Grants from public charities. Irs govefile Grantor and contributor, reliance on ruling, Reliance by grantors and contributors. Irs govefile Gross receipts from nonmembership sources, Gross receipts from nonmembership sources. Irs govefile Group exemption letter, Group Exemption Letter H Health coverage organization, 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations Help (see Tax help) High-risk health coverage organization, 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations Home for the aged, Home for the aged. Irs govefile Homeowners' association, Homeowners' associations. Irs govefile Horticultural organization, Agricultural and Horticultural Organizations Hospital, Hospital. Irs govefile , Hospitals and medical research organizations. Irs govefile I Inactive organization, Organizational Changes and Exempt Status Industrial development, Other organizations. Irs govefile Instrumentalities, Instrumentalities. Irs govefile Insurance, organizations providing, Organizations Providing Insurance L Labor organization, Organizations subject to requirements. Irs govefile , Labor Organizations Law, public interest, Public-interest law firms. Irs govefile Legislative activity, Lobbying Expenditures, Legislative activity. Irs govefile Listed transaction, Prohibited tax shelter transaction. Irs govefile Literary organizations, Literary Organizations Loans, organizations providing, Organization providing loans. Irs govefile Lobbying expenditures, Lobbying Expenditures Local benevolent life insurance associations, Local Life Insurance Associations Local employees' association, Local Employees' Associations (501(c)(4)) Lodge system, Lodge system. Irs govefile M Medical research organization, Medical research organization. Irs govefile Medicare and Medicaid payments, Medicare and Medicaid payments. Irs govefile Membership fee, Membership fees. Irs govefile , Membership fees distinguished from gross receipts. Irs govefile Modification of exemption, Revocation or Modification of Exemption Mutual financial organization, 501(c)(14) - Credit Unions and Other Mutual Financial Organizations Mutual or cooperative association, Mutual or Cooperative Associations N Nursing bureau, Community nursing bureau. Irs govefile O One-third support test, One-third support test. Irs govefile Organization assets, Dedication and Distribution of Assets Dedication, Dedication. Irs govefile Distribution, Distribution. Irs govefile Organizational changes, Organizational Changes and Exempt Status P Penalties, Penalties for failure to file. Irs govefile Failure to allow public inspection, Penalties Failure to disclose, Penalty for failure to disclose. Irs govefile , Penalties. Irs govefile , Penalty. Irs govefile Failure to file, Penalties for failure to file. Irs govefile Perpetual care organization, Perpetual care organization. Irs govefile Political activity, Dues Used for Lobbying or Political Activities, Political activity. Irs govefile , Political activity. Irs govefile Political organization Income tax return, Political Organization Income Tax Return Taxable income, Political Organization Income Tax Return Power of attorney, Power of attorney. Irs govefile Preferred stock, Common and preferred stock. Irs govefile Prevention of cruelty to children or animals, Prevention of Cruelty to Children or Animals Private delivery service, Private delivery service. Irs govefile Private foundations, Private Foundations Private operating foundation, Private Operating Foundations Private school, Private Schools, Racially Nondiscriminatory Policy Prohibited tax shelter transactions Entity managers, Entity manager. Irs govefile Entity managers excise tax, Manager Level Tax Listed transaction, Prohibited tax shelter transaction. Irs govefile Prohibited reportable transactions, Prohibited tax shelter transaction. Irs govefile Subsequently listed transaction, Subsequently listed transaction. Irs govefile Tax-exempt entities, Tax-exempt entities. Irs govefile Public charity Gifts and contributions, Gifts, contributions, and grants distinguished from gross receipts. Irs govefile Grant from, Grants from public charities. Irs govefile Section 509(a)(1), Section 509(a)(1) Organizations Section 509(a)(2), Section 509(a)(2) Organizations Section 509(a)(3), Section 509(a)(3) Organizations Section 509(a)(4), Section 509(a)(4) Organizations Support test, One-third support test. Irs govefile , One-third support test. Irs govefile Public inspection Annual return, Annual Information Return Exemption applications, Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms Forms 8871 and 8872, Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms Public-interest law firm, Public-interest law firms. Irs govefile Publications (see Tax help) Publicly supported organization, Publicly supported organizations. Irs govefile , Qualifying as Publicly Supported Attraction of public support, Attraction of public support requirement. Irs govefile Ten-percent-of-support, Ten-percent-of-support requirement. Irs govefile R Racial composition, How to determine racial composition. Irs govefile Racially nondiscriminatory policy, Racially Nondiscriminatory Policy Real estate board, Real estate board. Irs govefile Recognition of exemption, application, Application for Recognition of Exemption Religious organizations, Religious Organizations Requests other than applications, Miscellaneous Procedures Responsiveness test, Responsiveness test. Irs govefile Revocation of exemption, Revocation or Modification of Exemption Ruling letter, Rulings and Determination Letters S Scholarship Private school, Scholarship and loan programs. Irs govefile Scholarships, Scholarships. Irs govefile School, private, Private Schools Scientific organizations, Scientific Organizations Section 501(c)(3) organizations Amateur athletic, Amateur Athletic Organizations Literary, Literary Organizations Prevention of cruelty, Prevention of Cruelty to Children or Animals Private foundations, Private Foundations and Public Charities Public charities, Public Charities Qualifications, Section 501(c)(3) Organizations Religious, Religious Organizations Scientific, Scientific Organizations Section 501(c)(3) Organizations Charitable, Charitable Organizations Educational, Educational Organizations and Private Schools Single entity, Single entity. Irs govefile Social clubs, Organizations subject to requirements. Irs govefile , 501(c)(7) - Social and Recreation Clubs Social welfare organization, Organizations subject to requirements. Irs govefile , 501(c)(4) - Civic Leagues and Social Welfare Organizations Specified organizations, Specified organizations. Irs govefile Sports organization, amateur, Qualified amateur sports organization. Irs govefile State-sponsored, 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations High-risk health coverage organization, 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations Workers' compensation reinsurance organization, 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations Stock or commodity exchange, Stock or commodity exchange. Irs govefile Suggestions, Comments and suggestions. Irs govefile Supplemental unemployment benefit trust, Supplemental Unemployment Benefit Trusts (501(c)(17)) Support, Support. Irs govefile , Support from a governmental unit. Irs govefile , Support from the general public. Irs govefile Support test, One-third support test. Irs govefile Facts and circumstances, Facts and circumstances test. Irs govefile One-third, One-third support test. Irs govefile Public charity, One-third support test. Irs govefile Supporting organization, Supporting organization transactions occurring after July 25, 2006. Irs govefile T Tax help, Technical advice, Appeals Office Consideration Testing for public safety, Section 509(a)(4) Organizations Title-holding corporation, 501(c)(2) - Title-Holding Corporations for Single Parent Corporations U Unemployment benefit trust, Supplemental Unemployment Benefit Trusts (501(c)(17)) Unrelated business income, Unrelated Business Income Tax Return Unusual grants, Unusual grants. Irs govefile , Unusual grants. Irs govefile User fee, Power of attorney. Irs govefile , User fee. Irs govefile V Veterans' organization, 501(c)(19) - Veterans' Organizations Voluntary employees' beneficiary association, Voluntary Employees' Beneficiary Associations (501(c)(9)) Volunteer fire company, Volunteer fire companies. Irs govefile W War veterans' organization, 501(c)(19) - Veterans' Organizations Withdrawal of application, Withdrawal of application. Irs govefile Withholding information from public, Requests for withholding of information from the public. Irs govefile Work Opportunity Tax Credit, Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans. Irs govefile Workers' compensation reinsurance organization, 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations Prev  Up     Home   More Online Publications
 
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Filing Season Update

Latest Information on Tax Season and Refunds


Common Refund Questions and Answers Updated

Feb. 26, 2014

Will ordering a transcript help you determine when you’ll get your refund?

No, a tax transcript will not help you determine when you will get your refund. This is among the common myths and misconceptions that are often repeated in social media. The codes listed on tax transcripts do not provide any early insight into when a refund will be issued. The best way to check on your refund is by visiting “Where’s My Refund?” While transcripts include a lot of detailed information regarding actions taken on your account, the codes do not mean the same thing for everyone and they do not necessarily reflect how any of these actions do or do not impact the amount or timing of your refund. IRS transcripts are best and most often used to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation.

For more answers to common refund questions visit our 2014 Tax Season Refund Frequently Asked Questions page.

Refund Update

Feb. 21, 2014

The IRS issues more than 9 out of 10 refunds in less than 21 days from the day the IRS receives tax returns. Recent filing season data, as of Feb. 14 shows the IRS has already issued more than 31 million refunds this year. While the IRS works hard to issue refunds as quickly as possible some tax returns take longer to process than others for many reasons including when a return is incomplete, includes errors, includes Form 8379, Injured Spouse Allocation, or needs further review.

The IRS reminds taxpayers that the 21 day timeframe begins when you are notified by your preparer or tax preparation software company that the IRS has acknowledged acceptance of your tax return. Acceptance in this case means the IRS has accepted the return for processing. Further reviews may still be necessary. This year, Jan. 31 was the first day the IRS could start processing tax returns; even though you or your preparer may have submitted a return electronically before that date.

The best advice for all taxpayers is to check Where’s My Refund on IRS.gov. The Where’s My Refund web and phone tools are updated just once a day so there is no need to check more often. If we need more information to process your return, we will contact you — usually by mail. IRS phone and walk-in representatives can only research the status of a refund if it’s been 21 days or more since the return was filed electronically, more than 6 weeks since a paper return was mailed, or if Where’s My Refund? directs you to contact us.

IRS Statement on 1121
Feb. 12, 2014

Note to Taxpayers


The IRS is off to a strong start to the tax season. Through early February, millions of refunds worth billions of dollars have already been issued. There are no major issues with tax refunds or processing at this time.

Every year, especially at the start of tax season, people are concerned about getting their refunds quickly. The IRS issues nine out of 10 refunds to taxpayers in less than 21 days after the IRS receives the return. Some refunds take longer because of other factors, including IRS work to prevent refund fraud and identity theft. There are many questions about the process. The best source of information about refunds is on IRS.gov, including the YouTube video on the refund process and refund FAQ page.

Early February 1121 Information


A very small percentage of taxpayers may see an 1121 reference number if they check “Where’s My Refund?” after they initially were provided a projected refund date by the tool. The IRS is aware of this situation, and emphasizes that the small group of taxpayers who see this reference number should continue checking Where’s My Refund for an update. If we need more information to process their return, we will contact them — usually by mail.

The IRS began processing returns on Jan. 31, and we’ve already issued millions of refunds. The IRS works hard to issue refunds as quickly as possible, but as part of our effort to prevent improper payments some tax returns take longer to process than others for many reasons, such as when a return includes errors, is incomplete, or needs further review. We apologize for any confusion or inconvenience.

Q: What should taxpayers do if they receive an 1121 reference number when they check Where’s My Refund?

A: The best advice for all taxpayers is to continue checking Where’s My Refund for a refund date. If we need more information to process their return, we will contact them — usually by mail. The web and phone tools are updated just once a day so there is no need to check more often. Our phone and walk-in representatives can only research the status of a refund if it’s been 21 days or more since the return was filed electronically, more than 6 weeks since a paper return was mailed, or if Where’s My Refund? directs a taxpayer to contact us as in the case of those who see the 1121 reference number.

Q: I read in social media that a reference number 1121 means I’m being audited. Is that true?

A: No, this code is simply a reference number that our telephone representatives use to help them research your account. It does not mean the taxpayer is being audited. If the IRS needs more information to process the return, we will contact the taxpayer — usually by mail.
 

Page Last Reviewed or Updated: 14-Mar-2014

The Irs Govefile

Irs govefile 7. Irs govefile   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. Irs govefile For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. Irs govefile There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. Irs govefile However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. Irs govefile See Contributions , later. Irs govefile This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Irs govefile What is the tax benefit of the Coverdell ESA. Irs govefile   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. Irs govefile   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. Irs govefile See Tax-Free Distributions , later. Irs govefile    Table 7-1 summarizes the main features of the Coverdell ESA. Irs govefile Table 7-1. Irs govefile Coverdell ESA at a Glance Do not rely on this table alone. Irs govefile It provides only general highlights. Irs govefile See the text for definitions of terms in bold type and for more complete explanations. Irs govefile Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. Irs govefile Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. Irs govefile Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. Irs govefile Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). Irs govefile Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. Irs govefile What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. Irs govefile When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. Irs govefile To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. Irs govefile The document creating and governing the account must be in writing and must satisfy the following requirements. Irs govefile The trustee or custodian must be a bank or an entity approved by the IRS. Irs govefile The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. Irs govefile The contribution is in cash. Irs govefile The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Irs govefile The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. Irs govefile Money in the account cannot be invested in life insurance contracts. Irs govefile Money in the account cannot be combined with other property except in a common trust fund or common investment fund. Irs govefile The balance in the account generally must be distributed within 30 days after the earlier of the following events. Irs govefile The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Irs govefile The beneficiary's death. Irs govefile Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. Irs govefile For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. Irs govefile Designated beneficiary. Irs govefile   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. Irs govefile Contributions to a qualified tuition program (QTP). Irs govefile   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. Irs govefile In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. Irs govefile See chapter 8, Qualified Tuition Program . Irs govefile Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. Irs govefile Eligible postsecondary school. Irs govefile   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irs govefile S. Irs govefile Department of Education. Irs govefile It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs govefile The educational institution should be able to tell you if it is an eligible educational institution. Irs govefile   Certain educational institutions located outside the United States also participate in the U. Irs govefile S. Irs govefile Department of Education's Federal Student Aid (FSA) programs. Irs govefile Eligible elementary or secondary school. Irs govefile   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Irs govefile Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. Irs govefile As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. Irs govefile The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. Irs govefile Tuition and fees. Irs govefile Books, supplies, and equipment. Irs govefile Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. Irs govefile Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). Irs govefile The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Irs govefile The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Irs govefile The actual amount charged if the student is residing in housing owned or operated by the school. Irs govefile Half-time student. Irs govefile   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Irs govefile Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. Irs govefile As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. Irs govefile There are special rules for computer-related expenses. Irs govefile The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. Irs govefile Tuition and fees. Irs govefile Books, supplies, and equipment. Irs govefile Academic tutoring. Irs govefile Special needs services for a special needs beneficiary. Irs govefile The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. Irs govefile Room and board. Irs govefile Uniforms. Irs govefile Transportation. Irs govefile Supplementary items and services (including extended day programs). Irs govefile The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. Irs govefile (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Irs govefile ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. Irs govefile For individuals filing joint returns, that amount is $220,000. Irs govefile Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. Irs govefile There is no requirement that an organization's income be below a certain level. Irs govefile Contributions must meet all of the following requirements. Irs govefile They must be in cash. Irs govefile They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Irs govefile They must be made by the due date of the contributor's tax return (not including extensions). Irs govefile Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. Irs govefile Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. Irs govefile Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. Irs govefile When contributions considered made. Irs govefile   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. Irs govefile They must be made by the due date (not including extensions) for filing your return for the preceding year. Irs govefile   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. Irs govefile Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. Irs govefile Limit for each designated beneficiary. Irs govefile   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. Irs govefile This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. Irs govefile Rollovers are discussed under Rollovers and Other Transfers , later. Irs govefile Example. Irs govefile When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. Irs govefile In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. Irs govefile For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. Irs govefile Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. Irs govefile These contributions could be put into any of Maria's Coverdell ESA accounts. Irs govefile Limit for each contributor. Irs govefile   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. Irs govefile This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. Irs govefile Example. Irs govefile The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. Irs govefile If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. Irs govefile Reduced limit. Irs govefile   Your contribution limit may be reduced. Irs govefile If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). Irs govefile If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. Irs govefile Table 7-2. Irs govefile Coverdell ESA Contributions at a Glance Do not rely on this table alone. Irs govefile It provides only general highlights. Irs govefile See the text for more complete explanations. Irs govefile Question Answer Are contributions deductible? No. Irs govefile What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. Irs govefile What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. Irs govefile What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. Irs govefile Can contributions other than cash be made to a Coverdell ESA? No. Irs govefile When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. Irs govefile Modified adjusted gross income (MAGI). Irs govefile   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Irs govefile MAGI when using Form 1040A. Irs govefile   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Irs govefile MAGI when using Form 1040. Irs govefile   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Irs govefile MAGI when using Form 1040NR. Irs govefile   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. Irs govefile MAGI when using Form 1040NR-EZ. Irs govefile   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. Irs govefile   If you have any of these adjustments, you can use Worksheet 7-1. Irs govefile MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. Irs govefile Worksheet 7-1. Irs govefile MAGI for a Coverdell ESA 1. Irs govefile Enter your adjusted gross income  (Form 1040, line 38)   1. Irs govefile   2. Irs govefile Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Irs govefile       3. Irs govefile Enter your foreign housing deduction (Form 2555, line 50)   3. Irs govefile         4. Irs govefile Enter the amount of income from Puerto Rico you are excluding   4. Irs govefile       5. Irs govefile Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Irs govefile       6. Irs govefile Add lines 2, 3, 4, and 5   6. Irs govefile   7. Irs govefile Add lines 1 and 6. Irs govefile This is your  modified adjusted gross income   7. Irs govefile   Figuring the limit. Irs govefile    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. Irs govefile The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). Irs govefile The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). Irs govefile Subtract the result from $2,000. Irs govefile This is the amount you can contribute for each beneficiary. Irs govefile You can use Worksheet 7-2. Irs govefile Coverdell ESA Contribution Limit to figure the limit on contributions. Irs govefile    Worksheet 7-2. Irs govefile Coverdell ESA Contribution Limit 1. Irs govefile Maximum contribution   1. Irs govefile $2,000 2. Irs govefile Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Irs govefile   3. Irs govefile Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Irs govefile   4. Irs govefile Subtract line 3 from line 2. Irs govefile If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Irs govefile   5. Irs govefile Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Irs govefile     Note. Irs govefile If the amount on line 4 is greater than or equal to the amount on line 5, stop here. Irs govefile You are not allowed to contribute to a Coverdell ESA for 2013. Irs govefile       6. Irs govefile Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Irs govefile . Irs govefile 7. Irs govefile Multiply line 1 by line 6   7. Irs govefile   8. Irs govefile Subtract line 7 from line 1   8. Irs govefile   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Irs govefile Example. Irs govefile Paul, who is single, had a MAGI of $96,500 for 2013. Irs govefile Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. Irs govefile Worksheet 7-2. Irs govefile Coverdell ESA Contribution Limit—Illustrated 1. Irs govefile Maximum contribution   1. Irs govefile $2,000 2. Irs govefile Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Irs govefile 96,500 3. Irs govefile Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Irs govefile 95,000 4. Irs govefile Subtract line 3 from line 2. Irs govefile If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Irs govefile 1,500 5. Irs govefile Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Irs govefile 15,000   Note. Irs govefile If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. Irs govefile You are not allowed to  contribute to a Coverdell ESA for 2013. Irs govefile       6. Irs govefile Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Irs govefile . Irs govefile 100 7. Irs govefile Multiply line 1 by line 6   7. Irs govefile 200 8. Irs govefile Subtract line 7 from line 1   8. Irs govefile 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Irs govefile Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. Irs govefile Excess contributions are the total of the following two amounts. Irs govefile Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). Irs govefile Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. Irs govefile Exceptions. Irs govefile   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). Irs govefile   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. Irs govefile You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. Irs govefile Box 2 of that form will show the amount of earnings on your excess contributions. Irs govefile Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. Irs govefile See Instructions for Recipient on the back of copy B of your Form 1099-Q. Irs govefile Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. Irs govefile For more information, see Taxable Distributions , later. Irs govefile   The excise tax does not apply to any rollover contribution. Irs govefile Note. Irs govefile Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. Irs govefile Example. Irs govefile In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. Irs govefile Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. Irs govefile In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. Irs govefile Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. Irs govefile (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. Irs govefile Figuring and reporting the additional tax. Irs govefile   You figure this excise tax in Part V of Form 5329. Irs govefile Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). Irs govefile Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. Irs govefile The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. Irs govefile Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. Irs govefile This age limitation does not apply if the new beneficiary is a special needs beneficiary. Irs govefile An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. Irs govefile Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Irs govefile These are not taxable distributions. Irs govefile Members of the beneficiary's family. Irs govefile   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Irs govefile Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Irs govefile Brother, sister, stepbrother, or stepsister. Irs govefile Father or mother or ancestor of either. Irs govefile Stepfather or stepmother. Irs govefile Son or daughter of a brother or sister. Irs govefile Brother or sister of father or mother. Irs govefile Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Irs govefile The spouse of any individual listed above. Irs govefile First cousin. Irs govefile Example. Irs govefile When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. Irs govefile He wanted to give this money to his younger sister, who was still in high school. Irs govefile In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. Irs govefile Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. Irs govefile This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). Irs govefile Military death gratuity. Irs govefile   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). Irs govefile Such payments are made to an eligible survivor upon the death of a member of the armed forces. Irs govefile The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. Irs govefile   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . Irs govefile The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. Irs govefile   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. Irs govefile See Distributions , later. Irs govefile The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. Irs govefile Changing the Designated Beneficiary The designated beneficiary can be changed. Irs govefile See Members of the beneficiary's family , earlier. Irs govefile There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. Irs govefile Example. Irs govefile Assume the same situation for Aaron as in the last example (see Rollovers , earlier). Irs govefile Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. Irs govefile Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. Irs govefile After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. Irs govefile Example. Irs govefile In their divorce settlement, Peg received her ex-husband's Coverdell ESA. Irs govefile In this process, the account was transferred into her name. Irs govefile Peg now treats the funds in this Coverdell ESA as if she were the original owner. Irs govefile Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. Irs govefile Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. Irs govefile See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. Irs govefile Table 7-3. Irs govefile Coverdell ESA Distributions at a Glance Do not rely on this table alone. Irs govefile It provides only general highlights. Irs govefile See the text for definitions of terms in bold type and for more complete explanations. Irs govefile Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. Irs govefile After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. Irs govefile Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. Irs govefile Also, certain transfers to members of the beneficiary's family are permitted. Irs govefile Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. Irs govefile Adjusted qualified education expenses. Irs govefile   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. Irs govefile Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs govefile The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. Irs govefile Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. Irs govefile Do not report tax-free distributions (including qualifying rollovers) on your tax return. Irs govefile Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. Irs govefile Excess distribution. Irs govefile   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. Irs govefile Earnings and basis. Irs govefile   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. Irs govefile The amount of your gross distribution will be shown in box 1. Irs govefile For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. Irs govefile This will be shown in the blank box below boxes 5 and 6. Irs govefile   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. Irs govefile Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. Irs govefile Figure the taxable portion for 2013 as shown in the following steps. Irs govefile Multiply the total amount distributed by a fraction. Irs govefile The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. Irs govefile Subtract the amount figured in (1) from the total amount distributed during 2013. Irs govefile The result is the amount of earnings included in the distribution(s). Irs govefile Multiply the amount of earnings figured in (2) by a fraction. Irs govefile The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. Irs govefile Subtract the amount figured in (3) from the amount figured in (2). Irs govefile The result is the amount the beneficiary must include in income. Irs govefile The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. Irs govefile Example. Irs govefile You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. Irs govefile There were no contributions in 2013. Irs govefile This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. Irs govefile The value (balance) of your account on December 31, 2013, was $950. Irs govefile You had $700 of adjusted qualified education expenses (AQEE) for the year. Irs govefile Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. Irs govefile   1. Irs govefile $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. Irs govefile $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. Irs govefile $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. Irs govefile $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. Irs govefile Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. Irs govefile Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). Irs govefile Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Irs govefile This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. Irs govefile Example. Irs govefile Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. Irs govefile He paid his college expenses from the following sources. Irs govefile     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. Irs govefile Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Irs govefile Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. Irs govefile     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. Irs govefile The balance in Derek's account was $1,800 on December 31, 2013. Irs govefile Prior to 2013, $2,100 had been contributed to this account. Irs govefile Contributions for 2013 totaled $400. Irs govefile Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. Irs govefile   1. Irs govefile $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. Irs govefile $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. Irs govefile $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. Irs govefile $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). Irs govefile This is the amount of distributed earnings not used for adjusted qualified higher education expenses. Irs govefile Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. Irs govefile The following two examples illustrate possible allocations. Irs govefile Example 1. Irs govefile In 2013, Beatrice graduated from high school and began her first semester of college. Irs govefile That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. Irs govefile To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. Irs govefile No one claimed Beatrice as a dependent, nor was she eligible for an education credit. Irs govefile She did not receive any tax-free educational assistance in 2013. Irs govefile Beatrice must allocate her total qualified education expenses between the two distributions. Irs govefile Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. Irs govefile The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. Irs govefile Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). Irs govefile She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. Irs govefile Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. Irs govefile (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. Irs govefile ) Example 2. Irs govefile Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. Irs govefile In this case, she allocates her qualified education expenses as follows. Irs govefile Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. Irs govefile Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). Irs govefile   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). Irs govefile See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. Irs govefile   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). Irs govefile The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. Irs govefile However, you do not have to allocate your expenses in the same way. Irs govefile You can use any reasonable method. Irs govefile Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. Irs govefile You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Irs govefile Your basis is the total amount of contributions to that Coverdell ESA. Irs govefile You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Irs govefile If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. Irs govefile ) from all such accounts in order to determine your taxable earnings for the year. Irs govefile By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. Irs govefile For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. Irs govefile Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Irs govefile Exceptions. Irs govefile   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Irs govefile Made because the designated beneficiary is disabled. Irs govefile A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Irs govefile A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Irs govefile Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs govefile Made on account of the attendance of the designated beneficiary at a U. Irs govefile S. Irs govefile military academy (such as the USMA at West Point). Irs govefile This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Irs govefile S. Irs govefile Code) attributable to such attendance. Irs govefile Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). Irs govefile Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). Irs govefile The distributed earnings must be included in gross income for the year in which the excess contribution was made. Irs govefile Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Irs govefile Figuring the additional tax. Irs govefile    Use Part II of Form 5329, to figure any additional tax. Irs govefile Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Irs govefile When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. Irs govefile The designated beneficiary reaches age 30. Irs govefile In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. Irs govefile However, this rule does not apply if the beneficiary is a special needs beneficiary. Irs govefile The designated beneficiary dies before reaching age 30. Irs govefile In this case, the remaining assets must generally be distributed within 30 days after the date of death. Irs govefile Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. Irs govefile (“Family member” was defined earlier under Rollovers . Irs govefile ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. Irs govefile This age limitation does not apply if the new beneficiary is a special needs beneficiary. Irs govefile There are no tax consequences as a result of the transfer. Irs govefile How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. Irs govefile You determine these earnings as shown in the following two steps. Irs govefile Multiply the amount distributed by a fraction. Irs govefile The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. Irs govefile Subtract the amount figured in (1) from the total amount distributed during 2013. Irs govefile The result is the amount of earnings included in the distribution. Irs govefile For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. Irs govefile The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. Irs govefile Worksheet 7-3 Instructions. Irs govefile Coverdell ESA—Taxable Distributions and Basis Line G. Irs govefile Enter the total distributions received from all Coverdell ESAs during 2013. Irs govefile Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). Irs govefile Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. Irs govefile Line 2. Irs govefile Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. Irs govefile   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. Irs govefile For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. Irs govefile For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. Irs govefile You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. Irs govefile Line 4. Irs govefile Enter the total distributions received from this Coverdell ESA in 2013. Irs govefile Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). Irs govefile   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. Irs govefile Line 7. Irs govefile Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. Irs govefile A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. Irs govefile   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. Irs govefile An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. Irs govefile Worksheet 7-3. Irs govefile Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. Irs govefile • • • Complete Part I, lines A through H, on only one worksheet. Irs govefile  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. Irs govefile  Complete Part III, the Summary (line 16), on only one worksheet. Irs govefile Part I. Irs govefile Qualified Education Expenses (Complete for total expenses)       A. Irs govefile Enter your total qualified education expenses for 2013   A. Irs govefile   B. Irs govefile Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. Irs govefile         C. Irs govefile Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). Irs govefile Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. Irs govefile         D. Irs govefile Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. Irs govefile         E. Irs govefile Add lines B, C, and D   D. Irs govefile   F. Irs govefile Subtract line E from line A. Irs govefile This is your adjusted qualified education expense for 2013   E. Irs govefile   G. Irs govefile Enter your total distributions from all Coverdell ESAs during 2013. Irs govefile Do not include rollovers  or the return of excess contributions (see instructions)   F. Irs govefile   H. Irs govefile Divide line F by line G. Irs govefile Enter the result as a decimal (rounded to at least 3 places). Irs govefile If the  result is 1. Irs govefile 000 or more, enter 1. Irs govefile 000   G. Irs govefile . Irs govefile Part II. Irs govefile Taxable Distributions and Basis (Complete separately for each account) 1. Irs govefile Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. Irs govefile Do not include rollovers or the return of excess contributions   1. Irs govefile   2. Irs govefile Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. Irs govefile   3. Irs govefile Add lines 1 and 2   3. Irs govefile   4. Irs govefile Enter the total distributions from this Coverdell ESA during 2013. Irs govefile Do not include rollovers  or the return of excess contributions (see instructions)   4. Irs govefile   5. Irs govefile Multiply line 4 by line H. Irs govefile This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. Irs govefile         6. Irs govefile Subtract line 5 from line 4   6. Irs govefile         7. Irs govefile Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. Irs govefile         8. Irs govefile Add lines 4 and 7   8. Irs govefile         9. Irs govefile Divide line 3 by line 8. Irs govefile Enter the result as a decimal (rounded to  at least 3 places). Irs govefile If the result is 1. Irs govefile 000 or more, enter 1. Irs govefile 000   9. Irs govefile . Irs govefile       10. Irs govefile Multiply line 4 by line 9. Irs govefile This is the amount of basis allocated to your  distributions, and is tax free   10. Irs govefile     Note. Irs govefile If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. Irs govefile       11. Irs govefile Subtract line 10 from line 4   11. Irs govefile   12. Irs govefile Divide line 5 by line 4. Irs govefile Enter the result as a decimal (rounded to  at least 3 places). Irs govefile If the result is 1. Irs govefile 000 or more, enter 1. Irs govefile 000   12. Irs govefile . Irs govefile       13. Irs govefile Multiply line 11 by line 12. Irs govefile This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. Irs govefile   14. Irs govefile Subtract line 13 from line 11. Irs govefile This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. Irs govefile   15. Irs govefile Subtract line 10 from line 3. Irs govefile This is your basis in this Coverdell ESA as of December 31, 2013   15. Irs govefile   Part III. Irs govefile Summary (Complete only once)       16. Irs govefile Taxable amount. Irs govefile Add together all amounts on line 14 for all your Coverdell ESAs. Irs govefile Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. Irs govefile   Prev  Up  Next   Home   More Online Publications