Coverdell Distributions (Form 1099-Q) taxable question

[josephfolsomcpa]

This is the first time I've dealt with Coverdell distributions for college.  New Client is MFJ, dependent daughter started college in Fall 2020.  Daughter has no 2020 income.  Client has too much taxable income to qualify for any college credits or deductions. The Coverdell accounts have very little basis.

Client withdrew two distributions for daughter's college expense.  They received the first Coverdell funds in Aug. 2020 and then wrote a check to the college in Aug. 2020.  The second Coverdell distribution was deposited into the client's account in late Dec. 2020, and the check to the college was dated 1-3-2021.  The 1099-Q arrived with both distributions listed since they were taken out in 2020.  The 1099-Q shows the dependent daughter's SS# on it.

I have two issues:

1. There is a timing mismatch for the second distribution and spring college payment.  The coverdell is 2020 and the spring check is 2021.  I cannot seem to find an exception to include the 2021 actual payment to go against the second 2020 coverdell withdrawal.  This results in the second coverdell being taxable.  >>>Am I missing something here, is there an exception to this timing issue?<<<<<

2. Assuming the second coverdell is in fact taxable, who's tax return should the taxable amount be reported on? Parents or daughter since the 1099-Q has the daughter's SS# on it.

[qbteachmt]

Here is an article for your second issue, for how to read the boxes and who would be reporting it on their tax return:

https://www.investopedia.com/terms/f/form1099q.asp

The covid issues delayed many tuition bills relative to the date the parents took distributions to make the expected required payment, so many of these fall across year end. I saw somewhere that someone was going by a three-month rule, a distribution in 2020 for making the payment by March 2021. I can't find that now, though. Sorry.