Should excessive hsa contributions in 2021 be counted as taxable income in 2022 tax return?

[oio14644]

We used Turbotax for our 2022 tax return and we received a letter from the IRS today saying I made a mistake.

In 2021, we had $3600 excessive hsa contributions and applied the $3600 to the next year (2022) hsa contributions.

However,  for 2022 tax return, Turbotax  did not count the $3600 as the total taxable income, but  IRS says that the $3600 should be included in the 2022 taxable income

thus, we need to pay tax for these $3600

I am confused, who is right, Turbotax or IRS?  Should this $3600 be counted as our taxable income?  

This is snapshot of form 8889 for 2022, is line 13 supposed to be 0 instead of 3600? I do not know why turbotax set it 3600 instead of 0, thanks

[Mike9241]

was the contribution through an employer and reported in box 12w of w-2? then since wages were reduced by the excess, you now have $3600 of income for 2021 (not 2022). you would pay  6% penalty in 2021 and income taxes on the $3600 but the excess woul be available for 2022 and be a deduction if you qualify and don't have an excess contribution in 2022.   if the HSA contribution was personal in 2021 there would be a 6% penalty but no income. Then in 2022 as long as you qualify, the 2021 excess would be avilable as a deduction. we can't see what was done for 2021 or 2022 returns so you'll need to contact the IRS to review the issue. it is possible you reported someyhing incorrectly on the 8889. since Turbotax knows about the c/o you should not have entered the $3600 as a 2022 contribution on line 2 of the 2022 8889.

[Opus 17]

Did you report the excess on your 2021 return and pay the 6% penalty?

Did you make any contributions in 2022, by payroll or by yourself?

Does your 2022 tax return include form 5329, and how is Part VII filled out?

[oio14644]

I attached a snapshot of form 8889 for 2022, is line 13 supposed to be 0 instead of 3600? I do not know why turbotax set it 3600 instead of 0, thanks