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Payments from Qualified Education Programs
Form 1099-Q reports distributions, including removal of excess contributions, made from Coverdell Education Savings Accounts (“Coverdell ESAs”) (formerly known as Education IRAs). If you took a distribution or re-characterized assets from your Domini Coverdell ESA during 2012, you will receive a Form 1099-Q.
If you received more than one type of distribution from a Coverdell ESA in 2012, you will receive a consolidated Form 1099-Q showing the amount for each type of distribution.
Although Form 1099-Q has boxes for reporting the earnings (or loss) on the distribution, as well as the cost basis of the shares sold, Coverdell ESA recordkeepers and trustees generally do not have the information required to calculate these amounts. Instead, in accordance with guidance issued by the Internal Revenue Service, we are providing you with the fair market value of your Coverdell ESA as of December 31, 2012. We suggest that you review IRS Publication 970, Tax Benefits for Education for more information on how to calculate the earnings portion of the gross distribution, and for an explanation of “qualified education expenses.” When a distribution from such an account is used for “qualified education expenses” of the account beneficiary, such amount may likely not be taxable.
The information on your Form 1099-Q is reported to the IRS. In some cases, a copy of Form 1099-Q must be filed with your tax return.
Please consult a professional advisor as necessary for guidance on reporting the information from Form 1099-Q on your tax return, and for tax, legal and investment advice.
This information is intended for general informational purposes only. It is not meant to be a substitute for professional tax advice. Please consult a professional advisor to determine your individual tax situation and for tax, legal, and investment advice. The information set forth above concerns only federal income tax, not state or local income tax, except where specifically noted.
Please refer to the Instructions for Recipients on the back of your income tax forms. Please also refer to IRS Publication 564, Mutual Fund Distributions, and IRS Publication 590, Individual Retirement Arrangements (IRAs) available at www.irs.gov or by calling the IRS at 1-800-TAX-FORM (1-800-829-3676).