What is the name of your state? California
My 19 yo son earned $6526 in wages this year from part time jobs. He is a full time student. I am using turbotax to do his state (CA) and federal taxes. After going through the process it shows that he will receive a refund of $46 and will owe the state $66. I am very confused about penalties regarding his education account assessed. Here is his info:
Earned wages: $6526
Federal withholding $429
State Tax $48
Other Income: $7000 His education distrubution
On the 1099Q it breaks down like this:
Gross Distrubution $7000
Earnings $2122
Basis $4878
His 1098T $3049
When he started school we initially took withdrawls when we needed them but eventually cashed most of that account out and moved it to a liquid savings account to make it easily accessable. We entered his 1098T which was for 2006. Trouble is the first semester of 2006 was paid December of 2005 so I'm sure that amount went on the 1098 for 2005. I remember thinking it was a high figure at the time.
Now Turbo tax is saying that we have a $1198 taxable distrubution from a Coverdell account and will be assessed a 10% penalty. I don't know where they come up with the figure of $1198.
We have never spent a dime of this money for anything but education related expenses. Did we make a huge mistake in cashing it out and moving it to a liquid savings account? this account is set up at the bank in his and my husbands name. Everything from the beginning was 529 or UTMA. Can someone please help us? The remainder of the funds are being used this year. Even though we moved $7000, we didn't spend it all in 2006. We're using it now? Did we mess up? I certainly appreciate any and all help offered.
Thank you.
My 19 yo son earned $6526 in wages this year from part time jobs. He is a full time student. I am using turbotax to do his state (CA) and federal taxes. After going through the process it shows that he will receive a refund of $46 and will owe the state $66. I am very confused about penalties regarding his education account assessed. Here is his info:
Earned wages: $6526
Federal withholding $429
State Tax $48
Other Income: $7000 His education distrubution
On the 1099Q it breaks down like this:
Gross Distrubution $7000
Earnings $2122
Basis $4878
His 1098T $3049
When he started school we initially took withdrawls when we needed them but eventually cashed most of that account out and moved it to a liquid savings account to make it easily accessable. We entered his 1098T which was for 2006. Trouble is the first semester of 2006 was paid December of 2005 so I'm sure that amount went on the 1098 for 2005. I remember thinking it was a high figure at the time.
Now Turbo tax is saying that we have a $1198 taxable distrubution from a Coverdell account and will be assessed a 10% penalty. I don't know where they come up with the figure of $1198.
We have never spent a dime of this money for anything but education related expenses. Did we make a huge mistake in cashing it out and moving it to a liquid savings account? this account is set up at the bank in his and my husbands name. Everything from the beginning was 529 or UTMA. Can someone please help us? The remainder of the funds are being used this year. Even though we moved $7000, we didn't spend it all in 2006. We're using it now? Did we mess up? I certainly appreciate any and all help offered.
Thank you.
