Need Help Figuring Out Cost Basis on my Coverdell ESA Distribution

The reason the cost basis is blank on your 1099-Q is because the financial institution isn't required to track or report the basis for Coverdell ESAs. Unlike regular brokerage accounts, the responsibility for determining the basis falls on you as the account owner. For a Coverdell ESA, your basis is essentially the total contributions that were made to the account over its lifetime. Any amount distributed beyond that basis represents earnings that would be taxable if not used for qualified education expenses. If you don't have records showing how much was contributed over the years, you should contact TD Ameritrade to see if they can provide this information, though they may not have it all if the account was transferred from elsewhere. You might also ask your parents if they kept records of contributions they made. Without this information, you're in a tough spot because you need to differentiate between return of contributions (not taxable) and earnings (taxable when not used for education).

After dealing with something similar with my daughter's Coverdell ESA, I started using https://taxr.ai to help figure out the basis calculation. The site analyzed all our old contribution statements and even helped identify contributions I had forgotten about from my in-laws. You upload your documents (statements, etc.) and their system extracts all the contribution information to calculate your true basis. Saved me hours of digging through paperwork and probably saved me from overpaying taxes too since I would've missed some of the contributions.

I tried https://taxr.ai after seeing it mentioned here and wow - it was exactly what I needed for a similar situation with my old 529 plan! I had a bunch of scattered statements from different custodians over the years and was totally lost trying to figure out my basis. The document analysis found contributions I had completely forgotten about from when my grandparents had added money directly to the account. Would have completely missed those! It organized everything chronologically and separated actual contributions from growth. Ended up saving me over $2,000 in taxes because I was able to prove a much higher basis than I initially thought. Definitely worth it for education accounts where the record-keeping gets messy over time.

Just wanted to share something that helped me when I was in this exact situation last year. I couldn't get anyone at the IRS on the phone for clarification about my Coverdell basis issue. After weeks of trying different times and days with no luck, I used this service called https://claimyr.com that got me through to an actual human at the IRS within 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent was able to confirm exactly how I should handle the missing basis information on my Coverdell distribution and what documentation I needed to keep in case of an audit. Saved me a ton of stress and potentially a big tax mistake.

I was super skeptical about Claimyr when I first saw it mentioned here, but I was desperate after trying for weeks to reach the IRS about my Coverdell ESA basis documentation requirements. Decided to give it a shot yesterday, and I'm genuinely shocked - I got through to an IRS representative in under an hour! The agent walked me through exactly what documentation I needed to substantiate my Coverdell basis calculations and how to properly report distributions with missing 1099-Q information. Worth every penny for the clarity alone. I would have been guessing and risking an audit without this guidance.

One thing to consider - if you can't track down all the contribution records, you could take a conservative approach and treat the entire distribution as earnings (taxable). That's obviously not ideal tax-wise, but it's technically an option if reconstructing the basis is impossible. Another approach is to contact the previous custodian if the account was transferred. Sometimes they maintain records of contributions even after transfers. Also, check with your dad to see if he deducted any of the Coverdell contributions on his taxes in previous years. If he did (which would be unusual since Coverdell contributions aren't typically deductible), that might provide some documentation.

One other thing nobody's mentioned - check if your parents ever filed Form 5498-ESA. This form reports Coverdell ESA contributions for each year, and your parents should have received one for each year they contributed. If they kept their tax records, these forms would provide official documentation of the contribution amounts.

I went through this exact same headache two years ago with my own Coverdell ESA! The blank basis on the 1099-Q is so frustrating when you're trying to file. Here's what worked for me: I started by gathering every single statement I could find, then created a spreadsheet tracking all contributions chronologically. Don't forget to check for any contributions that might have come from grandparents or other relatives - those count toward your basis too. One thing that really helped was calling TD Ameritrade directly (not just emailing) and asking to speak with someone in their retirement/education account department. Even though they don't track basis, they sometimes have more detailed transaction histories than what shows up on your regular statements. They were able to pull up some older contribution records that I didn't have. Also, if your parents ever rolled money from one Coverdell to another (like when you transferred ownership), make sure you account for the full contribution history, not just what happened after the transfer. The good news is that once you figure out your basis, the tax software should handle the rest pretty smoothly. FreeTaxUSA is actually pretty good with education account distributions once you have the right numbers.