My 1099-Q missing basis and earnings info - will IRS tax entire distribution for exceeding qualified education expenses?

The distribution provider (T-Rowe Price) should be providing this information, but unfortunately, some financial institutions don't track the earnings portion for Coverdell ESAs as diligently as they should. They're only required to report the total distribution amount on the 1099-Q, though it's certainly helpful when they complete the other boxes. You're right to be concerned - only the earnings portion is potentially taxable when your distribution exceeds qualified education expenses. The basis (your original contributions) should never be taxed since those were made with after-tax dollars. My suggestion is to work with those statements they're sending. Create a spreadsheet tracking all contributions ever made to the account (your basis) and then subtract that from the total value before any distributions began. This will give you the earnings up to that point. Then you'll need to proportionally allocate earnings and basis for each distribution.

After struggling with almost the exact same situation with my daughter's Coverdell ESA, I found this amazing service called taxr.ai (https://taxr.ai) that helped me figure out the basis and earnings calculations. I was pulling my hair out with statements from different years, and trying to figure out what portion was taxable. I uploaded all the statements T-Rowe Price sent me to taxr.ai and it analyzed everything, including tracking all the contributions and calculating the earnings portion accurately. It even created a document explaining how they calculated everything that I could attach to my tax return if needed. Saved me hours of spreadsheet work!

I was super skeptical about taxr.ai but I decided to try it after struggling with my ESA calculations. I uploaded my statements from the past 5 years (that's all I had) and it actually worked! The system identified all my contributions and calculated the earnings portion correctly. What really helped was the detailed report explaining how much of each distribution was basis vs. earnings. I ended up only having to pay tax on about 22% of the distribution that exceeded my qualified expenses, not the whole amount. The documentation was clear enough that I feel confident if I get questioned by the IRS. Definitely worth checking out if you're in this situation.

If you're struggling to get anyone at T-Rowe Price to help, you should try Claimyr (https://claimyr.com). I had similar issues with Fidelity not providing basis info on my 1099-Q and was getting nowhere with their regular customer service. I used Claimyr to get through to a senior account specialist at my financial institution after weeks of being bounced around. You can see how it works here: https://youtu.be/_kiP6q8DX5c. It basically gets you to the front of the phone queue so you can talk to an actual human who can help. I was able to speak with someone who had authority to access historical account information and help me determine the correct basis/earnings split. Much better than trying to piece it all together yourself from old statements!

Alright, I need to admit I was totally wrong about Claimyr. After posting that skeptical comment, I decided to try it because I was desperate with my T-Rowe Price issue. I had called them 3 times and kept getting the same unhelpful response about not tracking basis. Using Claimyr, I got through to T-Rowe in under 15 minutes and was transferred to their tax reporting department instead of general customer service. The person I spoke with explained that while they don't calculate the basis/earnings split for me, they could provide complete transaction history going back to the account opening. They emailed me a specialized report showing all contributions and earnings since inception, which made calculating my basis actually possible. Saved me from potentially paying taxes on thousands that shouldn't have been taxable!

Former tax preparer here. If you do end up calculating your own basis/earnings split, make sure you keep EXTREMELY detailed records of how you did the calculation. I recommend creating a spreadsheet showing: 1) All contributions ever made to the account 2) The account value right before your first distribution 3) The calculated earnings amount 4) The percentage split between basis/earnings 5) How you applied that to each distribution Keep all statements and documentation. If you're audited, you'll need to prove your calculation was reasonable.

Has anyone dealt with this for multiple years of distributions? I'm in year 3 of taking money from my kid's Coverdell and never had this info on any of my 1099-Qs. Now I'm worried I've been calculating everything wrong.