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How Do I File An Amended Tax Return For 2011

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How Do I File An Amended Tax Return For 2011

How do i file an amended tax return for 2011 6. How do i file an amended tax return for 2011   How To Figure Cost of Goods Sold Table of Contents Introduction Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line 42 Cost of Goods Sold Introduction If you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. How do i file an amended tax return for 2011 However, to determine these costs, you must value your inventory at the beginning and end of each tax year. How do i file an amended tax return for 2011 This chapter applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income. How do i file an amended tax return for 2011 This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. How do i file an amended tax return for 2011 However, if you work in a personal service business and also sell or charge for the materials and supplies normally used in your business, this chapter applies to you. How do i file an amended tax return for 2011 If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. How do i file an amended tax return for 2011 For more information, see chapter 2. How do i file an amended tax return for 2011 Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42 Figure your cost of goods sold by filling out lines 35 through 42 of Schedule C. How do i file an amended tax return for 2011 These lines are reproduced below and are explained in the discussion that follows. How do i file an amended tax return for 2011 35 Inventory at beginning of year. How do i file an amended tax return for 2011 If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. How do i file an amended tax return for 2011 Do not include any amounts paid to yourself   38 Materials and supplies   39 Other costs   40 Add lines 35 through 39   41 Inventory at end of year   42 Cost of goods sold. How do i file an amended tax return for 2011 Subtract line 41 from line 40. How do i file an amended tax return for 2011  Enter the result here and on line 4   Line 35 Inventory at Beginning of Year If you are a merchant, beginning inventory is the cost of merchandise on hand at the beginning of the year that you will sell to customers. How do i file an amended tax return for 2011 If you are a manufacturer or producer, it includes the total cost of raw materials, work in process, finished goods, and materials and supplies used in manufacturing the goods (see Inventories in chapter 2). How do i file an amended tax return for 2011 Opening inventory usually will be identical to the closing inventory of the year before. How do i file an amended tax return for 2011 You must explain any difference in a schedule attached to your return. How do i file an amended tax return for 2011 Donation of inventory. How do i file an amended tax return for 2011   If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. How do i file an amended tax return for 2011 The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. How do i file an amended tax return for 2011 You must remove the amount of your contribution deduction from your opening inventory. How do i file an amended tax return for 2011 It is not part of the cost of goods sold. How do i file an amended tax return for 2011   If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. How do i file an amended tax return for 2011 Treat the inventory's cost as you would ordinarily treat it under your method of accounting. How do i file an amended tax return for 2011 For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. How do i file an amended tax return for 2011   A special rule may apply to certain donations of food inventory. How do i file an amended tax return for 2011 See Publication 526, Charitable Contributions. How do i file an amended tax return for 2011 Example 1. How do i file an amended tax return for 2011 You are a calendar year taxpayer who uses an accrual method of accounting. How do i file an amended tax return for 2011 In 2013, you contributed property from inventory to a church. How do i file an amended tax return for 2011 It had a fair market value of $600. How do i file an amended tax return for 2011 The closing inventory at the end of 2012 properly included $400 of costs due to the acquisition of the property, and in 2012, you properly deducted $50 of administrative and other expenses attributable to the property as business expenses. How do i file an amended tax return for 2011 The charitable contribution allowed for 2013 is $400 ($600 − $200). How do i file an amended tax return for 2011 The $200 is the amount that would be ordinary income if you had sold the contributed inventory at fair market value on the date of the gift. How do i file an amended tax return for 2011 The cost of goods sold you use in determining gross income for 2013 must not include the $400. How do i file an amended tax return for 2011 You remove that amount from opening inventory for 2013. How do i file an amended tax return for 2011 Example 2. How do i file an amended tax return for 2011 If, in Example 1, you acquired the contributed property in 2013 at a cost of $400, you would include the $400 cost of the property in figuring the cost of goods sold for 2013 and deduct the $50 of administrative and other expenses attributable to the property for that year. How do i file an amended tax return for 2011 You would not be allowed any charitable contribution deduction for the contributed property. How do i file an amended tax return for 2011 Line 36 Purchases Less Cost of Items Withdrawn for Personal Use If you are a merchant, use the cost of all merchandise you bought for sale. How do i file an amended tax return for 2011 If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. How do i file an amended tax return for 2011 Trade discounts. How do i file an amended tax return for 2011   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. How do i file an amended tax return for 2011 You must use the prices you pay (not the stated prices) in figuring your cost of purchases. How do i file an amended tax return for 2011 Do not show the discount amount separately as an item in gross income. How do i file an amended tax return for 2011   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. How do i file an amended tax return for 2011 Cash discounts. How do i file an amended tax return for 2011   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. How do i file an amended tax return for 2011 There are two methods of accounting for cash discounts. How do i file an amended tax return for 2011 You can either credit them to a separate discount account or deduct them from total purchases for the year. How do i file an amended tax return for 2011 Whichever method you use, you must be consistent. How do i file an amended tax return for 2011 If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. How do i file an amended tax return for 2011 For more information, see Change in Accounting Method in chapter 2. How do i file an amended tax return for 2011   If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. How do i file an amended tax return for 2011 If you use this method, do not reduce your cost of goods sold by the cash discounts. How do i file an amended tax return for 2011 Purchase returns and allowances. How do i file an amended tax return for 2011   You must deduct all returns and allowances from your total purchases during the year. How do i file an amended tax return for 2011 Merchandise withdrawn from sale. How do i file an amended tax return for 2011   If you withdraw merchandise for your personal or family use, you must exclude this cost from the total amount of merchandise you bought for sale. How do i file an amended tax return for 2011 Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. How do i file an amended tax return for 2011 You must also charge the amount to your drawing account. How do i file an amended tax return for 2011   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. How do i file an amended tax return for 2011 As stated above, you also use it to record withdrawals of merchandise for personal or family use. How do i file an amended tax return for 2011 This account is also known as a “withdrawals account” or “personal account. How do i file an amended tax return for 2011 ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. How do i file an amended tax return for 2011 Small merchandisers (wholesalers, retailers, etc. How do i file an amended tax return for 2011 ) usually do not have labor costs that can properly be charged to cost of goods sold. How do i file an amended tax return for 2011 In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product. How do i file an amended tax return for 2011 Direct labor. How do i file an amended tax return for 2011   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. How do i file an amended tax return for 2011 They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages. How do i file an amended tax return for 2011 Indirect labor. How do i file an amended tax return for 2011   Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process. How do i file an amended tax return for 2011 Other labor. How do i file an amended tax return for 2011   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. How do i file an amended tax return for 2011 Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs. How do i file an amended tax return for 2011 Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. How do i file an amended tax return for 2011 Those that are not used in the manufacturing process are treated as deferred charges. How do i file an amended tax return for 2011 You deduct them as a business expense when you use them. How do i file an amended tax return for 2011 Business expenses are discussed in chapter 8. How do i file an amended tax return for 2011 Line 39 Other Costs Examples of other costs incurred in a manufacturing or mining process that you charge to your cost of goods sold are as follows. How do i file an amended tax return for 2011 Containers. How do i file an amended tax return for 2011   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. How do i file an amended tax return for 2011 If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. How do i file an amended tax return for 2011 Freight-in. How do i file an amended tax return for 2011   Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of cost of goods sold. How do i file an amended tax return for 2011 Overhead expenses. How do i file an amended tax return for 2011   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. How do i file an amended tax return for 2011 The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. How do i file an amended tax return for 2011 Line 40 Add Lines 35 through 39 The total of lines 35 through 39 equals the cost of the goods available for sale during the year. How do i file an amended tax return for 2011 Line 41 Inventory at End of Year Subtract the value of your closing inventory (including, as appropriate, the allocable parts of the cost of raw materials and supplies, direct labor, and overhead expenses) from line 40. How do i file an amended tax return for 2011 Inventory at the end of the year is also known as closing or ending inventory. How do i file an amended tax return for 2011 Your ending inventory will usually become the beginning inventory of your next tax year. How do i file an amended tax return for 2011 Line 42 Cost of Goods Sold When you subtract your closing inventory (inventory at the end of the year) from the cost of goods available for sale, the remainder is your cost of goods sold during the tax year. 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The How Do I File An Amended Tax Return For 2011

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