[16975]
January 16, 2004
TO: 529 PLAN ADVISORY COMMITTEE No. 2-04
OPERATIONS MEMBERS No. 3-04
PENSION MEMBERS No. 2-04
PENSION OPERATIONS ADVISORY COMMITTEE No. 3-04
TAX MEMBERS No. 1-04
TRANSFER AGENT ADVISORY COMMITTEE No. 7-04
RE: 2004 FORM 1099-Q AND 1099-Q AND 5498-ESA INSTRUCTIONS
The IRS has released the 2004 Form 1099-Q and accompanying instructions and the 2004
instructions for Form 5498-ESA relating to Coverdell ESAs (“ESAs”).1 The 2004 Form 1099-Q
and instructions, which continue to apply the interim rules set forth in Notice 2003-53,2 do not
require that ESA custodians track earnings and basis for ESA accounts.3 Treasury and the IRS
are continuing to consider the Institute’s suggestion that they permanently maintain the pre-
existing ESA reporting regime, under which basis and earnings calculations remain the
responsibility of each ESA account holder.4
Lisa Robinson
Assistant Counsel
1 See http://www.irs.gov/pub/irs-pdf/f1099q.pdf for the 2004 Form 1099-Q; http://www.irs.gov/pub/irs-
pdf/i1099q.pdf for the 2004 instructions for Form 1099-Q; and http://www.irs.gov/pub/irs-pdf/i5498e.pdf for the
2004 instructions for Form 5498-ESA.
2 See Institute Memorandum (No. 16405) to 529 Plan Advisory Committee No. 43-03, Operations Members No. 22-03,
Pension Members No. 36-03, Pension Operations Advisory Committee No. 48-03, Tax Members No. 42-03 and
Transfer Agent Advisory Committee No. 72-03, dated August 4, 2003.
3 The instructions to Form 1099-Q provide that if payers/trustees do not report earnings and basis for ESA
distributions, they should leave boxes 2 and 3 (Earnings and Basis, respectively) blank. Do not enter zero. Instead,
payers/trustees should report the fair market value (“FMV”) as of the end of the year in the blank box below boxes 5
and 6 and label this amount “FMV.”
4 See Institute Memorandum (No. 16583) to 529 Plan Advisory Committee No. 55-03, Operations Members No. 28-03,
Pension Members No. 41-03, Pension Operations Advisory Committee No. 62-03, Tax Members No. 49-03 and
Transfer Agent Advisory Committee No. 91-03, dated September 26, 2003 (arguing that ESA custodians not be
required to do basis and earnings reporting).