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Free File 2011 Taxes

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Free File 2011 Taxes

Free file 2011 taxes Publication 908 - Introductory Material Table of Contents Future Developments What's New Reminders Introduction Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 908, such as legislation enacted after it was published, go to www. Free file 2011 taxes irs. Free file 2011 taxes gov/pub908. Free file 2011 taxes What's New Expiration of provision for catch-up contributions for IRC section 401(k) participants whose employer filed bankruptcy. Free file 2011 taxes  The Pension Protection Act of 2006, P. Free file 2011 taxes L. Free file 2011 taxes 109-280, previously allowed additional contributions of up to $7,000 in a traditional or Roth IRA for employees who participated in an IRC section 401(k) plan of an employer that filed bankruptcy in an earlier year. Free file 2011 taxes This provision was not extended for tax years beginning on or after January 1, 2010. Free file 2011 taxes Automatic 6-month extension of time to file a bankruptcy estate return now available for individuals in Chapter 7 or 11 bankruptcy. Free file 2011 taxes  Beginning June 24, 2011, the IRS clarified in T. Free file 2011 taxes D. Free file 2011 taxes 9531 that there is available an automatic 6-month extension of time to file a bankruptcy estate income tax return for individuals in Chapter 7 or Chapter 11 bankruptcy proceedings upon filing a required application. Free file 2011 taxes The previous extension of time to file a bankruptcy estate return was 5 months. Free file 2011 taxes Reminders The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Free file 2011 taxes  The changes to the U. Free file 2011 taxes S. Free file 2011 taxes Bankruptcy Code enacted by BAPCA are incorporated throughout this publication. Free file 2011 taxes Debtors filing under chapters 7, 11, 12, and 13 of the Bankruptcy Code must file all applicable federal, state, and local tax returns that become due after a case commences. Free file 2011 taxes Failure to file tax returns timely or obtain an extension can cause a bankruptcy case to be converted to another chapter or dismissed. Free file 2011 taxes In chapter 13 cases, the debtor must file all required tax returns for tax periods ending within 4 years of the filing of the bankruptcy petition. Free file 2011 taxes Photographs of missing children. Free file 2011 taxes  The IRS is a proud partner with the National Center for Missing and Exploited Children. Free file 2011 taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free file 2011 taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free file 2011 taxes Introduction This publication is not intended to cover bankruptcy law in general, or to provide detailed discussions of the tax rules for the more complex corporate bankruptcy reorganizations or other highly technical transactions. Free file 2011 taxes Additionally, this publication is not updated on an annual basis and may not reflect recent developments in bankruptcy or tax law. Free file 2011 taxes If you need more guidance on the bankruptcy or tax laws applicable to your case, you should seek professional advice. Free file 2011 taxes This publication explains the basic federal income tax aspects of bankruptcy. Free file 2011 taxes A fundamental goal of the bankruptcy laws enacted by Congress is to give an honest debtor a financial “fresh start”. Free file 2011 taxes This is accomplished through the bankruptcy discharge, which is a permanent injunction (court ordered prohibition) against the collection of certain debts as a personal liability of the debtor. Free file 2011 taxes Bankruptcy proceedings begin with the filing of either a voluntary petition in the United States Bankruptcy Court, or in certain cases an involuntary petition filed by creditors. Free file 2011 taxes This filing creates the bankruptcy estate. Free file 2011 taxes The bankruptcy estate generally consists of all of the assets the individual or entity owns on the date the bankruptcy petition was filed. Free file 2011 taxes The bankruptcy estate is treated as a separate taxable entity for individuals filing bankruptcy petitions under chapter 7 or 11 of the Bankruptcy Code, discussed later. Free file 2011 taxes The tax obligations of taxable bankruptcy estates are discussed later under Individuals in Chapter 7 or 11. Free file 2011 taxes Generally, when a debt owed to another person or entity is canceled, the amount canceled or forgiven is considered income that is taxed to the person owing the debt. Free file 2011 taxes If a debt is canceled under a bankruptcy proceeding, the amount canceled is not income. Free file 2011 taxes However, the canceled debt reduces other tax benefits to which the debtor would otherwise be entitled. Free file 2011 taxes See Debt Cancellation, later. Free file 2011 taxes Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets 551 Basis of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) SS-4 Application for Employer Identification Number, and separate instructions 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 1040 U. Free file 2011 taxes S. Free file 2011 taxes Individual Income Tax Return, and separate instructions Schedule SE (Form 1040) Self-Employment Tax 1040X Amended U. Free file 2011 taxes S. Free file 2011 taxes Individual Income Tax Return, and separate instructions 1041 U. Free file 2011 taxes S. Free file 2011 taxes Income Tax Return for Estates and Trusts, and separate instructions 1041-ES Estimated Income Tax for Estates and Trusts 1041-V Payment Voucher 4506 Request for Copy of Tax Return 4506-T Request for Transcript of Tax Return 4852 Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free file 2011 taxes 4868 Application for Automatic Extension of Time To File U. Free file 2011 taxes S. Free file 2011 taxes Individual Income Tax Return 7004 Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns See How To Get Tax Help, later, for information about getting these publications and forms. Free file 2011 taxes Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Ohio Attorney Generals Office

Website: Ohio Attorney Generals Office (Ohio attorney general website)

Address: Ohio Attorney Generals Office
Consumer Protection Section
30 E. Broad St., 14th Floor
Columbus, OH 43215-3400

Phone Number: 614-466-4986

Toll-free: 1-800-282-0515

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County Consumer Protection Offices

Summit County Office of Consumer Affairs

Website: Summit County Office of Consumer Affairs

Address: Summit County Office of Consumer Affairs
175 S. Main St., Suite 209
Akron, OH 44308

Phone Number: 330-643-2879

Cuyahoga County Department of Consumer Affairs

Website: Cuyahoga County Department of Consumer Affairs

Address: Cuyahoga County Department of Consumer Affairs
5398 1/2 Northfield Rd.
Maple Heights, OH 44137

Phone Number: 216-443-7035

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Commerce

Website: Department of Commerce

Address: Department of Commerce
Division of Financial Institutions
Consumer Complaints

77 S. High St., 21st Floor
Columbus, OH 43215-6120

Phone Number: 614-728-8400

Toll-free: 1-866-278-0003

TTY: 1-800-750-0750

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
Office of Consumer Affairs
50 W. Town St., 3rd Floor
Suite 300
Columbus, OH 43215

Phone Number: 614-644-2673

Toll-free: 1-800-686-1526
1-800-686-1527 (Fraud Hotline) 1-800-686-1527 (Fraud Hotline)

TTY: 614-644-3745

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Commerce

Website: Department of Commerce

Address: Department of Commerce
Division of Securities
77 S. High St.
22nd Floor
Columbus, OH 43215-6131

Phone Number: 614-644-7381

Toll-free: 1-800-788-1194 (Investor Protection Hotline)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Consumers' Counsel

Website: Consumers' Counsel

Address: Consumers' Counsel
10 W. Broad St., Suite 1800
Columbus, OH 43215-3485

Phone Number: 614-466-8574

Toll-free: 1-877-742-5622 (OH)

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
180 E. Broad St.
Columbus, OH 43215

Phone Number: 614-466-3292

Toll-free: 1-800-686-7826 (OH)

TTY: 1-800-686-1570 (OH)

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The Free File 2011 Taxes

Free file 2011 taxes 7. Free file 2011 taxes   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. Free file 2011 taxes For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. Free file 2011 taxes There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. Free file 2011 taxes However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. Free file 2011 taxes See Contributions , later. Free file 2011 taxes This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Free file 2011 taxes What is the tax benefit of the Coverdell ESA. Free file 2011 taxes   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. Free file 2011 taxes   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. Free file 2011 taxes See Tax-Free Distributions , later. Free file 2011 taxes    Table 7-1 summarizes the main features of the Coverdell ESA. Free file 2011 taxes Table 7-1. Free file 2011 taxes Coverdell ESA at a Glance Do not rely on this table alone. Free file 2011 taxes It provides only general highlights. Free file 2011 taxes See the text for definitions of terms in bold type and for more complete explanations. Free file 2011 taxes Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. Free file 2011 taxes 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. Free file 2011 taxes Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. Free file 2011 taxes 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). Free file 2011 taxes Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. Free file 2011 taxes 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. Free file 2011 taxes When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. Free file 2011 taxes To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. Free file 2011 taxes The document creating and governing the account must be in writing and must satisfy the following requirements. Free file 2011 taxes The trustee or custodian must be a bank or an entity approved by the IRS. Free file 2011 taxes The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. Free file 2011 taxes The contribution is in cash. Free file 2011 taxes The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Free file 2011 taxes The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. Free file 2011 taxes Money in the account cannot be invested in life insurance contracts. Free file 2011 taxes Money in the account cannot be combined with other property except in a common trust fund or common investment fund. Free file 2011 taxes The balance in the account generally must be distributed within 30 days after the earlier of the following events. Free file 2011 taxes The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Free file 2011 taxes The beneficiary's death. Free file 2011 taxes Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. Free file 2011 taxes For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. Free file 2011 taxes Designated beneficiary. Free file 2011 taxes   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. Free file 2011 taxes Contributions to a qualified tuition program (QTP). Free file 2011 taxes   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. Free file 2011 taxes 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. Free file 2011 taxes See chapter 8, Qualified Tuition Program . Free file 2011 taxes 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. Free file 2011 taxes Eligible postsecondary school. Free file 2011 taxes   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Free file 2011 taxes S. Free file 2011 taxes Department of Education. Free file 2011 taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free file 2011 taxes The educational institution should be able to tell you if it is an eligible educational institution. Free file 2011 taxes   Certain educational institutions located outside the United States also participate in the U. Free file 2011 taxes S. Free file 2011 taxes Department of Education's Federal Student Aid (FSA) programs. Free file 2011 taxes Eligible elementary or secondary school. Free file 2011 taxes   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Free file 2011 taxes Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. Free file 2011 taxes 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. Free file 2011 taxes The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. Free file 2011 taxes Tuition and fees. Free file 2011 taxes Books, supplies, and equipment. Free file 2011 taxes 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. Free file 2011 taxes Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). Free file 2011 taxes The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Free file 2011 taxes 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. Free file 2011 taxes The actual amount charged if the student is residing in housing owned or operated by the school. Free file 2011 taxes Half-time student. Free file 2011 taxes   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. Free file 2011 taxes Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. Free file 2011 taxes As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. Free file 2011 taxes There are special rules for computer-related expenses. Free file 2011 taxes The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. Free file 2011 taxes Tuition and fees. Free file 2011 taxes Books, supplies, and equipment. Free file 2011 taxes Academic tutoring. Free file 2011 taxes Special needs services for a special needs beneficiary. Free file 2011 taxes The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. Free file 2011 taxes Room and board. Free file 2011 taxes Uniforms. Free file 2011 taxes Transportation. Free file 2011 taxes Supplementary items and services (including extended day programs). Free file 2011 taxes 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. Free file 2011 taxes (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Free file 2011 taxes ) 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. Free file 2011 taxes For individuals filing joint returns, that amount is $220,000. Free file 2011 taxes Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. Free file 2011 taxes There is no requirement that an organization's income be below a certain level. Free file 2011 taxes Contributions must meet all of the following requirements. Free file 2011 taxes They must be in cash. Free file 2011 taxes They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Free file 2011 taxes They must be made by the due date of the contributor's tax return (not including extensions). Free file 2011 taxes 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. Free file 2011 taxes Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. Free file 2011 taxes Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. Free file 2011 taxes When contributions considered made. Free file 2011 taxes   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. Free file 2011 taxes They must be made by the due date (not including extensions) for filing your return for the preceding year. Free file 2011 taxes   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. Free file 2011 taxes 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. Free file 2011 taxes Limit for each designated beneficiary. Free file 2011 taxes   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. Free file 2011 taxes This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. Free file 2011 taxes Rollovers are discussed under Rollovers and Other Transfers , later. Free file 2011 taxes Example. Free file 2011 taxes 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. Free file 2011 taxes In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. Free file 2011 taxes 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. Free file 2011 taxes Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. Free file 2011 taxes These contributions could be put into any of Maria's Coverdell ESA accounts. Free file 2011 taxes Limit for each contributor. Free file 2011 taxes   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. Free file 2011 taxes 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. Free file 2011 taxes Example. Free file 2011 taxes The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. Free file 2011 taxes If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. Free file 2011 taxes Reduced limit. Free file 2011 taxes   Your contribution limit may be reduced. Free file 2011 taxes 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). Free file 2011 taxes 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. Free file 2011 taxes Table 7-2. Free file 2011 taxes Coverdell ESA Contributions at a Glance Do not rely on this table alone. Free file 2011 taxes It provides only general highlights. Free file 2011 taxes See the text for more complete explanations. Free file 2011 taxes Question Answer Are contributions deductible? No. Free file 2011 taxes What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes Can contributions other than cash be made to a Coverdell ESA? No. Free file 2011 taxes 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. Free file 2011 taxes Modified adjusted gross income (MAGI). Free file 2011 taxes   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Free file 2011 taxes MAGI when using Form 1040A. Free file 2011 taxes   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Free file 2011 taxes MAGI when using Form 1040. Free file 2011 taxes   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. Free file 2011 taxes MAGI when using Form 1040NR. Free file 2011 taxes   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. Free file 2011 taxes MAGI when using Form 1040NR-EZ. Free file 2011 taxes   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. Free file 2011 taxes   If you have any of these adjustments, you can use Worksheet 7-1. Free file 2011 taxes MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. Free file 2011 taxes Worksheet 7-1. Free file 2011 taxes MAGI for a Coverdell ESA 1. Free file 2011 taxes Enter your adjusted gross income  (Form 1040, line 38)   1. Free file 2011 taxes   2. Free file 2011 taxes Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Free file 2011 taxes       3. Free file 2011 taxes Enter your foreign housing deduction (Form 2555, line 50)   3. Free file 2011 taxes         4. Free file 2011 taxes Enter the amount of income from Puerto Rico you are excluding   4. Free file 2011 taxes       5. Free file 2011 taxes Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Free file 2011 taxes       6. Free file 2011 taxes Add lines 2, 3, 4, and 5   6. Free file 2011 taxes   7. Free file 2011 taxes Add lines 1 and 6. Free file 2011 taxes This is your  modified adjusted gross income   7. Free file 2011 taxes   Figuring the limit. Free file 2011 taxes    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. Free file 2011 taxes The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). Free file 2011 taxes The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). Free file 2011 taxes Subtract the result from $2,000. Free file 2011 taxes This is the amount you can contribute for each beneficiary. Free file 2011 taxes You can use Worksheet 7-2. Free file 2011 taxes Coverdell ESA Contribution Limit to figure the limit on contributions. Free file 2011 taxes    Worksheet 7-2. Free file 2011 taxes Coverdell ESA Contribution Limit 1. Free file 2011 taxes Maximum contribution   1. Free file 2011 taxes $2,000 2. Free file 2011 taxes 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. Free file 2011 taxes   3. Free file 2011 taxes Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Free file 2011 taxes   4. Free file 2011 taxes Subtract line 3 from line 2. Free file 2011 taxes If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Free file 2011 taxes   5. Free file 2011 taxes Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Free file 2011 taxes     Note. Free file 2011 taxes If the amount on line 4 is greater than or equal to the amount on line 5, stop here. Free file 2011 taxes You are not allowed to contribute to a Coverdell ESA for 2013. Free file 2011 taxes       6. Free file 2011 taxes Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Free file 2011 taxes . Free file 2011 taxes 7. Free file 2011 taxes Multiply line 1 by line 6   7. Free file 2011 taxes   8. Free file 2011 taxes Subtract line 7 from line 1   8. Free file 2011 taxes   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Free file 2011 taxes Example. Free file 2011 taxes Paul, who is single, had a MAGI of $96,500 for 2013. Free file 2011 taxes 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. Free file 2011 taxes Worksheet 7-2. Free file 2011 taxes Coverdell ESA Contribution Limit—Illustrated 1. Free file 2011 taxes Maximum contribution   1. Free file 2011 taxes $2,000 2. Free file 2011 taxes 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. Free file 2011 taxes 96,500 3. Free file 2011 taxes Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Free file 2011 taxes 95,000 4. Free file 2011 taxes Subtract line 3 from line 2. Free file 2011 taxes If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Free file 2011 taxes 1,500 5. Free file 2011 taxes Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Free file 2011 taxes 15,000   Note. Free file 2011 taxes If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. Free file 2011 taxes You are not allowed to  contribute to a Coverdell ESA for 2013. Free file 2011 taxes       6. Free file 2011 taxes Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Free file 2011 taxes . Free file 2011 taxes 100 7. Free file 2011 taxes Multiply line 1 by line 6   7. Free file 2011 taxes 200 8. Free file 2011 taxes Subtract line 7 from line 1   8. Free file 2011 taxes 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Free file 2011 taxes 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. Free file 2011 taxes Excess contributions are the total of the following two amounts. Free file 2011 taxes 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). Free file 2011 taxes 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. Free file 2011 taxes Exceptions. Free file 2011 taxes   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). Free file 2011 taxes   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. Free file 2011 taxes You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. Free file 2011 taxes Box 2 of that form will show the amount of earnings on your excess contributions. Free file 2011 taxes Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. Free file 2011 taxes See Instructions for Recipient on the back of copy B of your Form 1099-Q. Free file 2011 taxes Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. Free file 2011 taxes For more information, see Taxable Distributions , later. Free file 2011 taxes   The excise tax does not apply to any rollover contribution. Free file 2011 taxes Note. Free file 2011 taxes Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. Free file 2011 taxes Example. Free file 2011 taxes In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes (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. Free file 2011 taxes Figuring and reporting the additional tax. Free file 2011 taxes   You figure this excise tax in Part V of Form 5329. Free file 2011 taxes Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). Free file 2011 taxes Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. Free file 2011 taxes The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. Free file 2011 taxes 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. Free file 2011 taxes This age limitation does not apply if the new beneficiary is a special needs beneficiary. Free file 2011 taxes An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. Free file 2011 taxes Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Free file 2011 taxes These are not taxable distributions. Free file 2011 taxes Members of the beneficiary's family. Free file 2011 taxes   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Free file 2011 taxes Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Free file 2011 taxes Brother, sister, stepbrother, or stepsister. Free file 2011 taxes Father or mother or ancestor of either. Free file 2011 taxes Stepfather or stepmother. Free file 2011 taxes Son or daughter of a brother or sister. Free file 2011 taxes Brother or sister of father or mother. Free file 2011 taxes Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Free file 2011 taxes The spouse of any individual listed above. Free file 2011 taxes First cousin. Free file 2011 taxes Example. Free file 2011 taxes When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. Free file 2011 taxes He wanted to give this money to his younger sister, who was still in high school. Free file 2011 taxes 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. Free file 2011 taxes Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. Free file 2011 taxes This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). Free file 2011 taxes Military death gratuity. Free file 2011 taxes   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). Free file 2011 taxes Such payments are made to an eligible survivor upon the death of a member of the armed forces. Free file 2011 taxes 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. Free file 2011 taxes   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . Free file 2011 taxes 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. Free file 2011 taxes   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. Free file 2011 taxes See Distributions , later. Free file 2011 taxes The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. Free file 2011 taxes Changing the Designated Beneficiary The designated beneficiary can be changed. Free file 2011 taxes See Members of the beneficiary's family , earlier. Free file 2011 taxes 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. Free file 2011 taxes Example. Free file 2011 taxes Assume the same situation for Aaron as in the last example (see Rollovers , earlier). Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. Free file 2011 taxes Example. Free file 2011 taxes In their divorce settlement, Peg received her ex-husband's Coverdell ESA. Free file 2011 taxes In this process, the account was transferred into her name. Free file 2011 taxes Peg now treats the funds in this Coverdell ESA as if she were the original owner. Free file 2011 taxes Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. Free file 2011 taxes 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. Free file 2011 taxes See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. Free file 2011 taxes Table 7-3. Free file 2011 taxes Coverdell ESA Distributions at a Glance Do not rely on this table alone. Free file 2011 taxes It provides only general highlights. Free file 2011 taxes See the text for definitions of terms in bold type and for more complete explanations. Free file 2011 taxes 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. Free file 2011 taxes After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. Free file 2011 taxes Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. Free file 2011 taxes Also, certain transfers to members of the beneficiary's family are permitted. Free file 2011 taxes Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. Free file 2011 taxes Adjusted qualified education expenses. Free file 2011 taxes   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. Free file 2011 taxes 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. Free file 2011 taxes The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. Free file 2011 taxes Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. Free file 2011 taxes Do not report tax-free distributions (including qualifying rollovers) on your tax return. Free file 2011 taxes 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. Free file 2011 taxes Excess distribution. Free file 2011 taxes   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. Free file 2011 taxes Earnings and basis. Free file 2011 taxes   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. Free file 2011 taxes The amount of your gross distribution will be shown in box 1. Free file 2011 taxes 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. Free file 2011 taxes This will be shown in the blank box below boxes 5 and 6. Free file 2011 taxes   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. Free file 2011 taxes 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. Free file 2011 taxes Figure the taxable portion for 2013 as shown in the following steps. Free file 2011 taxes Multiply the total amount distributed by a fraction. Free file 2011 taxes 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. Free file 2011 taxes Subtract the amount figured in (1) from the total amount distributed during 2013. Free file 2011 taxes The result is the amount of earnings included in the distribution(s). Free file 2011 taxes Multiply the amount of earnings figured in (2) by a fraction. Free file 2011 taxes The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. Free file 2011 taxes Subtract the amount figured in (3) from the amount figured in (2). Free file 2011 taxes The result is the amount the beneficiary must include in income. Free file 2011 taxes The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. Free file 2011 taxes Example. Free file 2011 taxes You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. Free file 2011 taxes There were no contributions in 2013. Free file 2011 taxes This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. Free file 2011 taxes The value (balance) of your account on December 31, 2013, was $950. Free file 2011 taxes You had $700 of adjusted qualified education expenses (AQEE) for the year. Free file 2011 taxes Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. Free file 2011 taxes   1. Free file 2011 taxes $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. Free file 2011 taxes $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. Free file 2011 taxes $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. Free file 2011 taxes $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. Free file 2011 taxes Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. Free file 2011 taxes 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). Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes Example. Free file 2011 taxes Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. Free file 2011 taxes He paid his college expenses from the following sources. Free file 2011 taxes     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. Free file 2011 taxes Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Free file 2011 taxes Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. Free file 2011 taxes     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. Free file 2011 taxes The balance in Derek's account was $1,800 on December 31, 2013. Free file 2011 taxes Prior to 2013, $2,100 had been contributed to this account. Free file 2011 taxes Contributions for 2013 totaled $400. Free file 2011 taxes Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. Free file 2011 taxes   1. Free file 2011 taxes $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. Free file 2011 taxes $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. Free file 2011 taxes $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. Free file 2011 taxes $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). Free file 2011 taxes This is the amount of distributed earnings not used for adjusted qualified higher education expenses. Free file 2011 taxes 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. Free file 2011 taxes The following two examples illustrate possible allocations. Free file 2011 taxes Example 1. Free file 2011 taxes In 2013, Beatrice graduated from high school and began her first semester of college. Free file 2011 taxes 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. Free file 2011 taxes To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. Free file 2011 taxes No one claimed Beatrice as a dependent, nor was she eligible for an education credit. Free file 2011 taxes She did not receive any tax-free educational assistance in 2013. Free file 2011 taxes Beatrice must allocate her total qualified education expenses between the two distributions. Free file 2011 taxes 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. Free file 2011 taxes The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. Free file 2011 taxes 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). Free file 2011 taxes 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. Free file 2011 taxes Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. Free file 2011 taxes (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. Free file 2011 taxes ) Example 2. Free file 2011 taxes Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. Free file 2011 taxes In this case, she allocates her qualified education expenses as follows. Free file 2011 taxes 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. Free file 2011 taxes 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). Free file 2011 taxes   $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). Free file 2011 taxes See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. Free file 2011 taxes   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). Free file 2011 taxes The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. Free file 2011 taxes However, you do not have to allocate your expenses in the same way. Free file 2011 taxes You can use any reasonable method. Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes Your basis is the total amount of contributions to that Coverdell ESA. Free file 2011 taxes 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. Free file 2011 taxes If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. Free file 2011 taxes ) from all such accounts in order to determine your taxable earnings for the year. Free file 2011 taxes By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. Free file 2011 taxes For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. Free file 2011 taxes 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. Free file 2011 taxes Exceptions. Free file 2011 taxes   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. Free file 2011 taxes Made because the designated beneficiary is disabled. Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes 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. Free file 2011 taxes Made on account of the attendance of the designated beneficiary at a U. Free file 2011 taxes S. Free file 2011 taxes military academy (such as the USMA at West Point). Free file 2011 taxes 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. Free file 2011 taxes S. Free file 2011 taxes Code) attributable to such attendance. Free file 2011 taxes 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). Free file 2011 taxes Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). Free file 2011 taxes The distributed earnings must be included in gross income for the year in which the excess contribution was made. Free file 2011 taxes Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Free file 2011 taxes Figuring the additional tax. Free file 2011 taxes    Use Part II of Form 5329, to figure any additional tax. Free file 2011 taxes Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Free file 2011 taxes When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. Free file 2011 taxes The designated beneficiary reaches age 30. Free file 2011 taxes In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. Free file 2011 taxes However, this rule does not apply if the beneficiary is a special needs beneficiary. Free file 2011 taxes The designated beneficiary dies before reaching age 30. Free file 2011 taxes In this case, the remaining assets must generally be distributed within 30 days after the date of death. Free file 2011 taxes 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. Free file 2011 taxes (“Family member” was defined earlier under Rollovers . Free file 2011 taxes ) 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. Free file 2011 taxes This age limitation does not apply if the new beneficiary is a special needs beneficiary. Free file 2011 taxes There are no tax consequences as a result of the transfer. Free file 2011 taxes 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. Free file 2011 taxes You determine these earnings as shown in the following two steps. Free file 2011 taxes Multiply the amount distributed by a fraction. Free file 2011 taxes 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. Free file 2011 taxes Subtract the amount figured in (1) from the total amount distributed during 2013. Free file 2011 taxes The result is the amount of earnings included in the distribution. Free file 2011 taxes For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. Free file 2011 taxes 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. Free file 2011 taxes Worksheet 7-3 Instructions. Free file 2011 taxes Coverdell ESA—Taxable Distributions and Basis Line G. Free file 2011 taxes Enter the total distributions received from all Coverdell ESAs during 2013. Free file 2011 taxes Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). Free file 2011 taxes 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. Free file 2011 taxes Line 2. Free file 2011 taxes 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. Free file 2011 taxes   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. Free file 2011 taxes 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. Free file 2011 taxes For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. Free file 2011 taxes 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. Free file 2011 taxes Line 4. Free file 2011 taxes Enter the total distributions received from this Coverdell ESA in 2013. Free file 2011 taxes Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). Free file 2011 taxes   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. Free file 2011 taxes Line 7. Free file 2011 taxes 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. Free file 2011 taxes A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. Free file 2011 taxes   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. Free file 2011 taxes 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. Free file 2011 taxes Worksheet 7-3. Free file 2011 taxes Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. Free file 2011 taxes • • • Complete Part I, lines A through H, on only one worksheet. Free file 2011 taxes  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. Free file 2011 taxes  Complete Part III, the Summary (line 16), on only one worksheet. Free file 2011 taxes Part I. Free file 2011 taxes Qualified Education Expenses (Complete for total expenses)       A. Free file 2011 taxes Enter your total qualified education expenses for 2013   A. Free file 2011 taxes   B. Free file 2011 taxes 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. Free file 2011 taxes         C. Free file 2011 taxes Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). Free file 2011 taxes Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. Free file 2011 taxes         D. Free file 2011 taxes Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. Free file 2011 taxes         E. Free file 2011 taxes Add lines B, C, and D   D. Free file 2011 taxes   F. Free file 2011 taxes Subtract line E from line A. Free file 2011 taxes This is your adjusted qualified education expense for 2013   E. Free file 2011 taxes   G. Free file 2011 taxes Enter your total distributions from all Coverdell ESAs during 2013. Free file 2011 taxes Do not include rollovers  or the return of excess contributions (see instructions)   F. Free file 2011 taxes   H. Free file 2011 taxes Divide line F by line G. Free file 2011 taxes Enter the result as a decimal (rounded to at least 3 places). Free file 2011 taxes If the  result is 1. Free file 2011 taxes 000 or more, enter 1. Free file 2011 taxes 000   G. Free file 2011 taxes . Free file 2011 taxes Part II. Free file 2011 taxes Taxable Distributions and Basis (Complete separately for each account) 1. Free file 2011 taxes Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. Free file 2011 taxes Do not include rollovers or the return of excess contributions   1. Free file 2011 taxes   2. Free file 2011 taxes Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. Free file 2011 taxes   3. Free file 2011 taxes Add lines 1 and 2   3. Free file 2011 taxes   4. Free file 2011 taxes Enter the total distributions from this Coverdell ESA during 2013. Free file 2011 taxes Do not include rollovers  or the return of excess contributions (see instructions)   4. Free file 2011 taxes   5. Free file 2011 taxes Multiply line 4 by line H. Free file 2011 taxes This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. Free file 2011 taxes         6. Free file 2011 taxes Subtract line 5 from line 4   6. Free file 2011 taxes         7. Free file 2011 taxes Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. Free file 2011 taxes         8. Free file 2011 taxes Add lines 4 and 7   8. Free file 2011 taxes         9. Free file 2011 taxes Divide line 3 by line 8. Free file 2011 taxes Enter the result as a decimal (rounded to  at least 3 places). Free file 2011 taxes If the result is 1. Free file 2011 taxes 000 or more, enter 1. Free file 2011 taxes 000   9. Free file 2011 taxes . Free file 2011 taxes       10. Free file 2011 taxes Multiply line 4 by line 9. Free file 2011 taxes This is the amount of basis allocated to your  distributions, and is tax free   10. Free file 2011 taxes     Note. Free file 2011 taxes If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. Free file 2011 taxes       11. Free file 2011 taxes Subtract line 10 from line 4   11. Free file 2011 taxes   12. Free file 2011 taxes Divide line 5 by line 4. Free file 2011 taxes Enter the result as a decimal (rounded to  at least 3 places). Free file 2011 taxes If the result is 1. Free file 2011 taxes 000 or more, enter 1. Free file 2011 taxes 000   12. Free file 2011 taxes . Free file 2011 taxes       13. Free file 2011 taxes Multiply line 11 by line 12. Free file 2011 taxes This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. Free file 2011 taxes   14. Free file 2011 taxes Subtract line 13 from line 11. Free file 2011 taxes This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. Free file 2011 taxes   15. Free file 2011 taxes Subtract line 10 from line 3. Free file 2011 taxes This is your basis in this Coverdell ESA as of December 31, 2013   15. Free file 2011 taxes   Part III. Free file 2011 taxes Summary (Complete only once)       16. Free file 2011 taxes Taxable amount. Free file 2011 taxes Add together all amounts on line 14 for all your Coverdell ESAs. Free file 2011 taxes 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. Free file 2011 taxes   Prev  Up  Next   Home   More Online Publications