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Volunteer Income Tax Assistance

Volunteer income tax assistance 5. Volunteer income tax assistance   How To Get Tax Help Table of Contents Low Income Taxpayer Clinics Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Volunteer income tax assistance Free help with your tax return. Volunteer income tax assistance   You can get free help preparing your return nationwide from IRS-certified volunteers. Volunteer income tax assistance The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Volunteer income tax assistance The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Volunteer income tax assistance Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Volunteer income tax assistance In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Volunteer income tax assistance To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Volunteer income tax assistance gov, download the IRS2Go app, or call 1-800-906-9887. Volunteer income tax assistance   As part of the TCE program, AARP offers the Tax-Aide counseling program. Volunteer income tax assistance To find the nearest AARP Tax-Aide site, visit AARP's website at www. Volunteer income tax assistance aarp. Volunteer income tax assistance org/money/taxaide or call 1-888-227-7669. Volunteer income tax assistance For more information on these programs, go to IRS. Volunteer income tax assistance gov and enter “VITA” in the search box. Volunteer income tax assistance Internet. Volunteer income tax assistance    IRS. Volunteer income tax assistance gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Volunteer income tax assistance Download the free IRS2Go app from the iTunes app store or from Google Play. Volunteer income tax assistance Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Volunteer income tax assistance Check the status of your 2013 refund with the Where's My Refund? application on IRS. Volunteer income tax assistance gov or download the IRS2Go app and select the Refund Status option. Volunteer income tax assistance The IRS issues more than 9 out of 10 refunds in less than 21 days. Volunteer income tax assistance Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Volunteer income tax assistance You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Volunteer income tax assistance The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Volunteer income tax assistance Use the Interactive Tax Assistant (ITA) to research your tax questions. Volunteer income tax assistance No need to wait on the phone or stand in line. Volunteer income tax assistance The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Volunteer income tax assistance When you reach the response screen, you can print the entire interview and the final response for your records. Volunteer income tax assistance New subject areas are added on a regular basis. Volunteer income tax assistance  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Volunteer income tax assistance gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Volunteer income tax assistance You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Volunteer income tax assistance The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Volunteer income tax assistance When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Volunteer income tax assistance Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Volunteer income tax assistance You can also ask the IRS to mail a return or an account transcript to you. Volunteer income tax assistance Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Volunteer income tax assistance gov or by calling 1-800-908-9946. Volunteer income tax assistance Tax return and tax account transcripts are generally available for the current year and the past three years. Volunteer income tax assistance Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Volunteer income tax assistance Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Volunteer income tax assistance If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Volunteer income tax assistance Check the status of your amended return using Where's My Amended Return? Go to IRS. Volunteer income tax assistance gov and enter Where's My Amended Return? in the search box. Volunteer income tax assistance You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Volunteer income tax assistance It can take up to 3 weeks from the date you mailed it to show up in our system. Volunteer income tax assistance Make a payment using one of several safe and convenient electronic payment options available on IRS. Volunteer income tax assistance gov. Volunteer income tax assistance Select the Payment tab on the front page of IRS. Volunteer income tax assistance gov for more information. Volunteer income tax assistance Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Volunteer income tax assistance Figure your income tax withholding with the IRS Withholding Calculator on IRS. Volunteer income tax assistance gov. Volunteer income tax assistance Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Volunteer income tax assistance Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Volunteer income tax assistance gov. Volunteer income tax assistance Request an Electronic Filing PIN by going to IRS. Volunteer income tax assistance gov and entering Electronic Filing PIN in the search box. Volunteer income tax assistance Download forms, instructions and publications, including accessible versions for people with disabilities. Volunteer income tax assistance Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Volunteer income tax assistance gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Volunteer income tax assistance An employee can answer questions about your tax account or help you set up a payment plan. Volunteer income tax assistance Before you visit, check the Office Locator on IRS. Volunteer income tax assistance gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Volunteer income tax assistance If you have a special need, such as a disability, you can request an appointment. Volunteer income tax assistance Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Volunteer income tax assistance Apply for an Employer Identification Number (EIN). Volunteer income tax assistance Go to IRS. Volunteer income tax assistance gov and enter Apply for an EIN in the search box. Volunteer income tax assistance Read the Internal Revenue Code, regulations, or other official guidance. Volunteer income tax assistance Read Internal Revenue Bulletins. Volunteer income tax assistance Sign up to receive local and national tax news and more by email. Volunteer income tax assistance Just click on “subscriptions” above the search box on IRS. Volunteer income tax assistance gov and choose from a variety of options. Volunteer income tax assistance    Phone. Volunteer income tax assistance You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Volunteer income tax assistance Download the free IRS2Go app from the iTunes app store or from Google Play. Volunteer income tax assistance Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Volunteer income tax assistance gov, or download the IRS2Go app. Volunteer income tax assistance Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Volunteer income tax assistance The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Volunteer income tax assistance Most VITA and TCE sites offer free electronic filing. Volunteer income tax assistance Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Volunteer income tax assistance Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Volunteer income tax assistance Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Volunteer income tax assistance If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Volunteer income tax assistance The IRS issues more than 9 out of 10 refunds in less than 21 days. Volunteer income tax assistance Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Volunteer income tax assistance Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Volunteer income tax assistance The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Volunteer income tax assistance Note, the above information is for our automated hotline. Volunteer income tax assistance Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Volunteer income tax assistance Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Volunteer income tax assistance You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Volunteer income tax assistance It can take up to 3 weeks from the date you mailed it to show up in our system. Volunteer income tax assistance Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Volunteer income tax assistance You should receive your order within 10 business days. Volunteer income tax assistance Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Volunteer income tax assistance If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Volunteer income tax assistance Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Volunteer income tax assistance The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Volunteer income tax assistance These individuals can also contact the IRS through relay services such as the Federal Relay Service. Volunteer income tax assistance    Walk-in. Volunteer income tax assistance You can find a selection of forms, publications and services — in-person. Volunteer income tax assistance Products. Volunteer income tax assistance You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Volunteer income tax assistance Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Volunteer income tax assistance Services. Volunteer income tax assistance You can walk in to your local TAC for face-to-face tax help. Volunteer income tax assistance An employee can answer questions about your tax account or help you set up a payment plan. Volunteer income tax assistance Before visiting, use the Office Locator tool on IRS. Volunteer income tax assistance gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Volunteer income tax assistance    Mail. Volunteer income tax assistance You can send your order for forms, instructions, and publications to the address below. Volunteer income tax assistance You should receive a response within 10 business days after your request is received. Volunteer income tax assistance Internal Revenue Service 1201 N. Volunteer income tax assistance Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Volunteer income tax assistance The Taxpayer Advocate Service (TAS) is your voice at the IRS. Volunteer income tax assistance Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Volunteer income tax assistance   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Volunteer income tax assistance We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Volunteer income tax assistance You face (or your business is facing) an immediate threat of adverse action. Volunteer income tax assistance You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Volunteer income tax assistance   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Volunteer income tax assistance Here's why we can help: TAS is an independent organization within the IRS. Volunteer income tax assistance Our advocates know how to work with the IRS. Volunteer income tax assistance Our services are free and tailored to meet your needs. Volunteer income tax assistance We have offices in every state, the District of Columbia, and Puerto Rico. Volunteer income tax assistance   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Volunteer income tax assistance   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Volunteer income tax assistance If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Volunteer income tax assistance Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Volunteer income tax assistance Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Volunteer income tax assistance Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Volunteer income tax assistance Prev  Up  Next   Home   More Online Publications
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Volunteer income tax assistance 7. Volunteer income tax assistance   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. Volunteer income tax assistance For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. Volunteer income tax assistance There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. Volunteer income tax assistance However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. Volunteer income tax assistance See Contributions , later. Volunteer income tax assistance This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Volunteer income tax assistance What is the tax benefit of the Coverdell ESA. Volunteer income tax assistance   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. Volunteer income tax assistance   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. Volunteer income tax assistance See Tax-Free Distributions , later. Volunteer income tax assistance    Table 7-1 summarizes the main features of the Coverdell ESA. Volunteer income tax assistance Table 7-1. Volunteer income tax assistance Coverdell ESA at a Glance Do not rely on this table alone. Volunteer income tax assistance It provides only general highlights. Volunteer income tax assistance See the text for definitions of terms in bold type and for more complete explanations. Volunteer income tax assistance Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. Volunteer income tax assistance 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. Volunteer income tax assistance Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. Volunteer income tax assistance 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). Volunteer income tax assistance Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. Volunteer income tax assistance 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. Volunteer income tax assistance When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. Volunteer income tax assistance To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. Volunteer income tax assistance The document creating and governing the account must be in writing and must satisfy the following requirements. Volunteer income tax assistance The trustee or custodian must be a bank or an entity approved by the IRS. Volunteer income tax assistance The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. Volunteer income tax assistance The contribution is in cash. Volunteer income tax assistance The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Volunteer income tax assistance The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. Volunteer income tax assistance Money in the account cannot be invested in life insurance contracts. Volunteer income tax assistance Money in the account cannot be combined with other property except in a common trust fund or common investment fund. Volunteer income tax assistance The balance in the account generally must be distributed within 30 days after the earlier of the following events. Volunteer income tax assistance The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Volunteer income tax assistance The beneficiary's death. Volunteer income tax assistance Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. Volunteer income tax assistance For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. Volunteer income tax assistance Designated beneficiary. Volunteer income tax assistance   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. Volunteer income tax assistance Contributions to a qualified tuition program (QTP). Volunteer income tax assistance   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. Volunteer income tax assistance 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. Volunteer income tax assistance See chapter 8, Qualified Tuition Program . Volunteer income tax assistance 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. Volunteer income tax assistance Eligible postsecondary school. Volunteer income tax assistance   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Volunteer income tax assistance S. Volunteer income tax assistance Department of Education. Volunteer income tax assistance It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Volunteer income tax assistance The educational institution should be able to tell you if it is an eligible educational institution. Volunteer income tax assistance   Certain educational institutions located outside the United States also participate in the U. Volunteer income tax assistance S. Volunteer income tax assistance Department of Education's Federal Student Aid (FSA) programs. Volunteer income tax assistance Eligible elementary or secondary school. Volunteer income tax assistance   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Volunteer income tax assistance Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. Volunteer income tax assistance 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. Volunteer income tax assistance The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. Volunteer income tax assistance Tuition and fees. Volunteer income tax assistance Books, supplies, and equipment. Volunteer income tax assistance 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. Volunteer income tax assistance Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). Volunteer income tax assistance The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Volunteer income tax assistance 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. Volunteer income tax assistance The actual amount charged if the student is residing in housing owned or operated by the school. Volunteer income tax assistance Half-time student. Volunteer income tax assistance   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. Volunteer income tax assistance Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. Volunteer income tax assistance As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. Volunteer income tax assistance There are special rules for computer-related expenses. Volunteer income tax assistance The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. Volunteer income tax assistance Tuition and fees. Volunteer income tax assistance Books, supplies, and equipment. Volunteer income tax assistance Academic tutoring. Volunteer income tax assistance Special needs services for a special needs beneficiary. Volunteer income tax assistance The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. Volunteer income tax assistance Room and board. Volunteer income tax assistance Uniforms. Volunteer income tax assistance Transportation. Volunteer income tax assistance Supplementary items and services (including extended day programs). Volunteer income tax assistance 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. Volunteer income tax assistance (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Volunteer income tax assistance ) 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. Volunteer income tax assistance For individuals filing joint returns, that amount is $220,000. Volunteer income tax assistance Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. Volunteer income tax assistance There is no requirement that an organization's income be below a certain level. Volunteer income tax assistance Contributions must meet all of the following requirements. Volunteer income tax assistance They must be in cash. Volunteer income tax assistance They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Volunteer income tax assistance They must be made by the due date of the contributor's tax return (not including extensions). Volunteer income tax assistance 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. Volunteer income tax assistance Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. Volunteer income tax assistance Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. Volunteer income tax assistance When contributions considered made. Volunteer income tax assistance   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. Volunteer income tax assistance They must be made by the due date (not including extensions) for filing your return for the preceding year. Volunteer income tax assistance   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. Volunteer income tax assistance 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. Volunteer income tax assistance Limit for each designated beneficiary. Volunteer income tax assistance   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. Volunteer income tax assistance This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. Volunteer income tax assistance Rollovers are discussed under Rollovers and Other Transfers , later. Volunteer income tax assistance Example. Volunteer income tax assistance 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. Volunteer income tax assistance In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. Volunteer income tax assistance 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. Volunteer income tax assistance Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. Volunteer income tax assistance These contributions could be put into any of Maria's Coverdell ESA accounts. Volunteer income tax assistance Limit for each contributor. Volunteer income tax assistance   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. Volunteer income tax assistance 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. Volunteer income tax assistance Example. Volunteer income tax assistance The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. Volunteer income tax assistance If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. Volunteer income tax assistance Reduced limit. Volunteer income tax assistance   Your contribution limit may be reduced. Volunteer income tax assistance 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). Volunteer income tax assistance 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. Volunteer income tax assistance Table 7-2. Volunteer income tax assistance Coverdell ESA Contributions at a Glance Do not rely on this table alone. Volunteer income tax assistance It provides only general highlights. Volunteer income tax assistance See the text for more complete explanations. Volunteer income tax assistance Question Answer Are contributions deductible? No. Volunteer income tax assistance What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance Can contributions other than cash be made to a Coverdell ESA? No. Volunteer income tax assistance 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. Volunteer income tax assistance Modified adjusted gross income (MAGI). Volunteer income tax assistance   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Volunteer income tax assistance MAGI when using Form 1040A. Volunteer income tax assistance   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Volunteer income tax assistance MAGI when using Form 1040. Volunteer income tax assistance   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. Volunteer income tax assistance MAGI when using Form 1040NR. Volunteer income tax assistance   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. Volunteer income tax assistance MAGI when using Form 1040NR-EZ. Volunteer income tax assistance   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. Volunteer income tax assistance   If you have any of these adjustments, you can use Worksheet 7-1. Volunteer income tax assistance MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. Volunteer income tax assistance Worksheet 7-1. Volunteer income tax assistance MAGI for a Coverdell ESA 1. Volunteer income tax assistance Enter your adjusted gross income  (Form 1040, line 38)   1. Volunteer income tax assistance   2. Volunteer income tax assistance Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Volunteer income tax assistance       3. Volunteer income tax assistance Enter your foreign housing deduction (Form 2555, line 50)   3. Volunteer income tax assistance         4. Volunteer income tax assistance Enter the amount of income from Puerto Rico you are excluding   4. Volunteer income tax assistance       5. Volunteer income tax assistance Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Volunteer income tax assistance       6. Volunteer income tax assistance Add lines 2, 3, 4, and 5   6. Volunteer income tax assistance   7. Volunteer income tax assistance Add lines 1 and 6. Volunteer income tax assistance This is your  modified adjusted gross income   7. Volunteer income tax assistance   Figuring the limit. Volunteer income tax assistance    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. Volunteer income tax assistance The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). Volunteer income tax assistance The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). Volunteer income tax assistance Subtract the result from $2,000. Volunteer income tax assistance This is the amount you can contribute for each beneficiary. Volunteer income tax assistance You can use Worksheet 7-2. Volunteer income tax assistance Coverdell ESA Contribution Limit to figure the limit on contributions. Volunteer income tax assistance    Worksheet 7-2. Volunteer income tax assistance Coverdell ESA Contribution Limit 1. Volunteer income tax assistance Maximum contribution   1. Volunteer income tax assistance $2,000 2. Volunteer income tax assistance 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. Volunteer income tax assistance   3. Volunteer income tax assistance Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Volunteer income tax assistance   4. Volunteer income tax assistance Subtract line 3 from line 2. Volunteer income tax assistance If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Volunteer income tax assistance   5. Volunteer income tax assistance Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Volunteer income tax assistance     Note. Volunteer income tax assistance If the amount on line 4 is greater than or equal to the amount on line 5, stop here. Volunteer income tax assistance You are not allowed to contribute to a Coverdell ESA for 2013. Volunteer income tax assistance       6. Volunteer income tax assistance Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Volunteer income tax assistance . Volunteer income tax assistance 7. Volunteer income tax assistance Multiply line 1 by line 6   7. Volunteer income tax assistance   8. Volunteer income tax assistance Subtract line 7 from line 1   8. Volunteer income tax assistance   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Volunteer income tax assistance Example. Volunteer income tax assistance Paul, who is single, had a MAGI of $96,500 for 2013. Volunteer income tax assistance 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. Volunteer income tax assistance Worksheet 7-2. Volunteer income tax assistance Coverdell ESA Contribution Limit—Illustrated 1. Volunteer income tax assistance Maximum contribution   1. Volunteer income tax assistance $2,000 2. Volunteer income tax assistance 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. Volunteer income tax assistance 96,500 3. Volunteer income tax assistance Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Volunteer income tax assistance 95,000 4. Volunteer income tax assistance Subtract line 3 from line 2. Volunteer income tax assistance If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Volunteer income tax assistance 1,500 5. Volunteer income tax assistance Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Volunteer income tax assistance 15,000   Note. Volunteer income tax assistance If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. Volunteer income tax assistance You are not allowed to  contribute to a Coverdell ESA for 2013. Volunteer income tax assistance       6. Volunteer income tax assistance Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Volunteer income tax assistance . Volunteer income tax assistance 100 7. Volunteer income tax assistance Multiply line 1 by line 6   7. Volunteer income tax assistance 200 8. Volunteer income tax assistance Subtract line 7 from line 1   8. Volunteer income tax assistance 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Volunteer income tax assistance 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. Volunteer income tax assistance Excess contributions are the total of the following two amounts. Volunteer income tax assistance 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). Volunteer income tax assistance 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. Volunteer income tax assistance Exceptions. Volunteer income tax assistance   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). Volunteer income tax assistance   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. Volunteer income tax assistance You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. Volunteer income tax assistance Box 2 of that form will show the amount of earnings on your excess contributions. Volunteer income tax assistance Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. Volunteer income tax assistance See Instructions for Recipient on the back of copy B of your Form 1099-Q. Volunteer income tax assistance Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. Volunteer income tax assistance For more information, see Taxable Distributions , later. Volunteer income tax assistance   The excise tax does not apply to any rollover contribution. Volunteer income tax assistance Note. Volunteer income tax assistance Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. Volunteer income tax assistance Example. Volunteer income tax assistance In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance (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. Volunteer income tax assistance Figuring and reporting the additional tax. Volunteer income tax assistance   You figure this excise tax in Part V of Form 5329. Volunteer income tax assistance Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). Volunteer income tax assistance Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. Volunteer income tax assistance The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. Volunteer income tax assistance 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. Volunteer income tax assistance This age limitation does not apply if the new beneficiary is a special needs beneficiary. Volunteer income tax assistance An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. Volunteer income tax assistance Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Volunteer income tax assistance These are not taxable distributions. Volunteer income tax assistance Members of the beneficiary's family. Volunteer income tax assistance   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Volunteer income tax assistance Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Volunteer income tax assistance Brother, sister, stepbrother, or stepsister. Volunteer income tax assistance Father or mother or ancestor of either. Volunteer income tax assistance Stepfather or stepmother. Volunteer income tax assistance Son or daughter of a brother or sister. Volunteer income tax assistance Brother or sister of father or mother. Volunteer income tax assistance Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Volunteer income tax assistance The spouse of any individual listed above. Volunteer income tax assistance First cousin. Volunteer income tax assistance Example. Volunteer income tax assistance When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. Volunteer income tax assistance He wanted to give this money to his younger sister, who was still in high school. Volunteer income tax assistance 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. Volunteer income tax assistance Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. Volunteer income tax assistance This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). Volunteer income tax assistance Military death gratuity. Volunteer income tax assistance   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). Volunteer income tax assistance Such payments are made to an eligible survivor upon the death of a member of the armed forces. Volunteer income tax assistance 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. Volunteer income tax assistance   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . Volunteer income tax assistance 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. Volunteer income tax assistance   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. Volunteer income tax assistance See Distributions , later. Volunteer income tax assistance The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. Volunteer income tax assistance Changing the Designated Beneficiary The designated beneficiary can be changed. Volunteer income tax assistance See Members of the beneficiary's family , earlier. Volunteer income tax assistance 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. Volunteer income tax assistance Example. Volunteer income tax assistance Assume the same situation for Aaron as in the last example (see Rollovers , earlier). Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. Volunteer income tax assistance Example. Volunteer income tax assistance In their divorce settlement, Peg received her ex-husband's Coverdell ESA. Volunteer income tax assistance In this process, the account was transferred into her name. Volunteer income tax assistance Peg now treats the funds in this Coverdell ESA as if she were the original owner. Volunteer income tax assistance Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. Volunteer income tax assistance 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. Volunteer income tax assistance See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. Volunteer income tax assistance Table 7-3. Volunteer income tax assistance Coverdell ESA Distributions at a Glance Do not rely on this table alone. Volunteer income tax assistance It provides only general highlights. Volunteer income tax assistance See the text for definitions of terms in bold type and for more complete explanations. Volunteer income tax assistance 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. Volunteer income tax assistance After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. Volunteer income tax assistance Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. Volunteer income tax assistance Also, certain transfers to members of the beneficiary's family are permitted. Volunteer income tax assistance Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. Volunteer income tax assistance Adjusted qualified education expenses. Volunteer income tax assistance   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. Volunteer income tax assistance 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. Volunteer income tax assistance The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. Volunteer income tax assistance Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. Volunteer income tax assistance Do not report tax-free distributions (including qualifying rollovers) on your tax return. Volunteer income tax assistance 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. Volunteer income tax assistance Excess distribution. Volunteer income tax assistance   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. Volunteer income tax assistance Earnings and basis. Volunteer income tax assistance   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. Volunteer income tax assistance The amount of your gross distribution will be shown in box 1. Volunteer income tax assistance 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. Volunteer income tax assistance This will be shown in the blank box below boxes 5 and 6. Volunteer income tax assistance   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. Volunteer income tax assistance 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. Volunteer income tax assistance Figure the taxable portion for 2013 as shown in the following steps. Volunteer income tax assistance Multiply the total amount distributed by a fraction. Volunteer income tax assistance 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. Volunteer income tax assistance Subtract the amount figured in (1) from the total amount distributed during 2013. Volunteer income tax assistance The result is the amount of earnings included in the distribution(s). Volunteer income tax assistance Multiply the amount of earnings figured in (2) by a fraction. Volunteer income tax assistance The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. Volunteer income tax assistance Subtract the amount figured in (3) from the amount figured in (2). Volunteer income tax assistance The result is the amount the beneficiary must include in income. Volunteer income tax assistance The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. Volunteer income tax assistance Example. Volunteer income tax assistance You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. Volunteer income tax assistance There were no contributions in 2013. Volunteer income tax assistance This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. Volunteer income tax assistance The value (balance) of your account on December 31, 2013, was $950. Volunteer income tax assistance You had $700 of adjusted qualified education expenses (AQEE) for the year. Volunteer income tax assistance Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. Volunteer income tax assistance   1. Volunteer income tax assistance $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. Volunteer income tax assistance $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. Volunteer income tax assistance $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. Volunteer income tax assistance $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. Volunteer income tax assistance Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. Volunteer income tax assistance 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). Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance Example. Volunteer income tax assistance Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. Volunteer income tax assistance He paid his college expenses from the following sources. Volunteer income tax assistance     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. Volunteer income tax assistance Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Volunteer income tax assistance Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. Volunteer income tax assistance     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. Volunteer income tax assistance The balance in Derek's account was $1,800 on December 31, 2013. Volunteer income tax assistance Prior to 2013, $2,100 had been contributed to this account. Volunteer income tax assistance Contributions for 2013 totaled $400. Volunteer income tax assistance Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. Volunteer income tax assistance   1. Volunteer income tax assistance $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. Volunteer income tax assistance $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. Volunteer income tax assistance $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. Volunteer income tax assistance $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). Volunteer income tax assistance This is the amount of distributed earnings not used for adjusted qualified higher education expenses. Volunteer income tax assistance 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. Volunteer income tax assistance The following two examples illustrate possible allocations. Volunteer income tax assistance Example 1. Volunteer income tax assistance In 2013, Beatrice graduated from high school and began her first semester of college. Volunteer income tax assistance 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. Volunteer income tax assistance To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. Volunteer income tax assistance No one claimed Beatrice as a dependent, nor was she eligible for an education credit. Volunteer income tax assistance She did not receive any tax-free educational assistance in 2013. Volunteer income tax assistance Beatrice must allocate her total qualified education expenses between the two distributions. Volunteer income tax assistance 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. Volunteer income tax assistance The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. Volunteer income tax assistance 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). Volunteer income tax assistance 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. Volunteer income tax assistance Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. Volunteer income tax assistance (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. Volunteer income tax assistance ) Example 2. Volunteer income tax assistance Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. Volunteer income tax assistance In this case, she allocates her qualified education expenses as follows. Volunteer income tax assistance 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. Volunteer income tax assistance 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). Volunteer income tax assistance   $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). Volunteer income tax assistance See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. Volunteer income tax assistance   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). Volunteer income tax assistance The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. Volunteer income tax assistance However, you do not have to allocate your expenses in the same way. Volunteer income tax assistance You can use any reasonable method. Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance Your basis is the total amount of contributions to that Coverdell ESA. Volunteer income tax assistance 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. Volunteer income tax assistance If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. Volunteer income tax assistance ) from all such accounts in order to determine your taxable earnings for the year. Volunteer income tax assistance By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. Volunteer income tax assistance For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. Volunteer income tax assistance 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. Volunteer income tax assistance Exceptions. Volunteer income tax assistance   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. Volunteer income tax assistance Made because the designated beneficiary is disabled. Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance 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. Volunteer income tax assistance Made on account of the attendance of the designated beneficiary at a U. Volunteer income tax assistance S. Volunteer income tax assistance military academy (such as the USMA at West Point). Volunteer income tax assistance 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. Volunteer income tax assistance S. Volunteer income tax assistance Code) attributable to such attendance. Volunteer income tax assistance 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). Volunteer income tax assistance Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). Volunteer income tax assistance The distributed earnings must be included in gross income for the year in which the excess contribution was made. Volunteer income tax assistance Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Volunteer income tax assistance Figuring the additional tax. Volunteer income tax assistance    Use Part II of Form 5329, to figure any additional tax. Volunteer income tax assistance Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Volunteer income tax assistance When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. Volunteer income tax assistance The designated beneficiary reaches age 30. Volunteer income tax assistance In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. Volunteer income tax assistance However, this rule does not apply if the beneficiary is a special needs beneficiary. Volunteer income tax assistance The designated beneficiary dies before reaching age 30. Volunteer income tax assistance In this case, the remaining assets must generally be distributed within 30 days after the date of death. Volunteer income tax assistance 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. Volunteer income tax assistance (“Family member” was defined earlier under Rollovers . Volunteer income tax assistance ) 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. Volunteer income tax assistance This age limitation does not apply if the new beneficiary is a special needs beneficiary. Volunteer income tax assistance There are no tax consequences as a result of the transfer. Volunteer income tax assistance 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. Volunteer income tax assistance You determine these earnings as shown in the following two steps. Volunteer income tax assistance Multiply the amount distributed by a fraction. Volunteer income tax assistance 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. Volunteer income tax assistance Subtract the amount figured in (1) from the total amount distributed during 2013. Volunteer income tax assistance The result is the amount of earnings included in the distribution. Volunteer income tax assistance For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. Volunteer income tax assistance 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. Volunteer income tax assistance Worksheet 7-3 Instructions. Volunteer income tax assistance Coverdell ESA—Taxable Distributions and Basis Line G. Volunteer income tax assistance Enter the total distributions received from all Coverdell ESAs during 2013. Volunteer income tax assistance Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). Volunteer income tax assistance 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. Volunteer income tax assistance Line 2. Volunteer income tax assistance 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. Volunteer income tax assistance   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. Volunteer income tax assistance 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. Volunteer income tax assistance For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. Volunteer income tax assistance 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. Volunteer income tax assistance Line 4. Volunteer income tax assistance Enter the total distributions received from this Coverdell ESA in 2013. Volunteer income tax assistance Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). Volunteer income tax assistance   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. Volunteer income tax assistance Line 7. Volunteer income tax assistance 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. Volunteer income tax assistance A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. Volunteer income tax assistance   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. Volunteer income tax assistance 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. Volunteer income tax assistance Worksheet 7-3. Volunteer income tax assistance Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. Volunteer income tax assistance • • • Complete Part I, lines A through H, on only one worksheet. Volunteer income tax assistance  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. Volunteer income tax assistance  Complete Part III, the Summary (line 16), on only one worksheet. Volunteer income tax assistance Part I. Volunteer income tax assistance Qualified Education Expenses (Complete for total expenses)       A. Volunteer income tax assistance Enter your total qualified education expenses for 2013   A. Volunteer income tax assistance   B. Volunteer income tax assistance 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. Volunteer income tax assistance         C. Volunteer income tax assistance Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). Volunteer income tax assistance Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. Volunteer income tax assistance         D. Volunteer income tax assistance Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. Volunteer income tax assistance         E. Volunteer income tax assistance Add lines B, C, and D   D. Volunteer income tax assistance   F. Volunteer income tax assistance Subtract line E from line A. Volunteer income tax assistance This is your adjusted qualified education expense for 2013   E. Volunteer income tax assistance   G. Volunteer income tax assistance Enter your total distributions from all Coverdell ESAs during 2013. Volunteer income tax assistance Do not include rollovers  or the return of excess contributions (see instructions)   F. Volunteer income tax assistance   H. Volunteer income tax assistance Divide line F by line G. Volunteer income tax assistance Enter the result as a decimal (rounded to at least 3 places). Volunteer income tax assistance If the  result is 1. Volunteer income tax assistance 000 or more, enter 1. Volunteer income tax assistance 000   G. Volunteer income tax assistance . Volunteer income tax assistance Part II. Volunteer income tax assistance Taxable Distributions and Basis (Complete separately for each account) 1. Volunteer income tax assistance Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. Volunteer income tax assistance Do not include rollovers or the return of excess contributions   1. Volunteer income tax assistance   2. Volunteer income tax assistance Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. Volunteer income tax assistance   3. Volunteer income tax assistance Add lines 1 and 2   3. Volunteer income tax assistance   4. Volunteer income tax assistance Enter the total distributions from this Coverdell ESA during 2013. Volunteer income tax assistance Do not include rollovers  or the return of excess contributions (see instructions)   4. Volunteer income tax assistance   5. Volunteer income tax assistance Multiply line 4 by line H. Volunteer income tax assistance This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. Volunteer income tax assistance         6. Volunteer income tax assistance Subtract line 5 from line 4   6. Volunteer income tax assistance         7. Volunteer income tax assistance Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. Volunteer income tax assistance         8. Volunteer income tax assistance Add lines 4 and 7   8. Volunteer income tax assistance         9. Volunteer income tax assistance Divide line 3 by line 8. Volunteer income tax assistance Enter the result as a decimal (rounded to  at least 3 places). Volunteer income tax assistance If the result is 1. Volunteer income tax assistance 000 or more, enter 1. Volunteer income tax assistance 000   9. Volunteer income tax assistance . Volunteer income tax assistance       10. Volunteer income tax assistance Multiply line 4 by line 9. Volunteer income tax assistance This is the amount of basis allocated to your  distributions, and is tax free   10. Volunteer income tax assistance     Note. Volunteer income tax assistance If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. Volunteer income tax assistance       11. Volunteer income tax assistance Subtract line 10 from line 4   11. Volunteer income tax assistance   12. Volunteer income tax assistance Divide line 5 by line 4. Volunteer income tax assistance Enter the result as a decimal (rounded to  at least 3 places). Volunteer income tax assistance If the result is 1. Volunteer income tax assistance 000 or more, enter 1. Volunteer income tax assistance 000   12. Volunteer income tax assistance . Volunteer income tax assistance       13. Volunteer income tax assistance Multiply line 11 by line 12. Volunteer income tax assistance This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. Volunteer income tax assistance   14. Volunteer income tax assistance Subtract line 13 from line 11. Volunteer income tax assistance This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. Volunteer income tax assistance   15. Volunteer income tax assistance Subtract line 10 from line 3. Volunteer income tax assistance This is your basis in this Coverdell ESA as of December 31, 2013   15. Volunteer income tax assistance   Part III. Volunteer income tax assistance Summary (Complete only once)       16. Volunteer income tax assistance Taxable amount. Volunteer income tax assistance Add together all amounts on line 14 for all your Coverdell ESAs. Volunteer income tax assistance 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. Volunteer income tax assistance   Prev  Up  Next   Home   More Online Publications