Regarding Coverdell Education Savings Account (ESA) (https://www.irs.gov)
Q. Who can contribute to a Coverdell ESA?
A. Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return).
How is the MAGI rule enforced and what is the penalty contributing to a Coverdell and earning over $110k MAGI?
I wouldn't be surprised if it was similar to excess contributions. The fairmark.com article More on Contributions to Coverdell Accounts suggests, "Unless there is a timely corrective distribution, a 6% penalty tax applies to the excess contribution. What's more, the 6% penalty applies to the same excess every year until it's withdrawn from the Coverdell account (or treated as withdrawn as explained below)."
The current answer tells you the penalty.
You also asked, how is it enforced? In my opinion, the excess deposit is easy, a broker sees the deposit and it's reported, just like IRA deposits or interest, etc. But the "over MAGI" is tougher to discover. The ESA can be funded by anyone. If I made over the MAGI limit, I can easily ask a close relative (grandma?) to make the deposit and find a way to get $2000 back to her. The 529 has no MAGI limit, and I suspect that the MAGA /ESA disqualification isn't high on the IRS radar.
