Entering HSA Distribution Results in Reduced Refund?

Forum|Forum|6 years ago
February 6, 2020
10 replies
117 views

I am self employed with an HSA. I made maximum allowable contribution at the beginning of the year and, of course, made deductions all for qualified medical expenses. When I enter the gross distribution amount (box 1 in Form 1099-SA) my calculated refund is immediately reduced for both federal and state refunds for a total of close to $1,000. I reviewed several posts and googled this issue and don't understand why it is reducing my refunds. Any comments would be greatly appreciated!

TurboTax Self Employed Online

Best answer by MarilynG

Expert Reviewed

But that's the problem, it's not going back up. Thoughts on this?

Start at the beginning of the HSA section Deductions & Credits > Medical.
Indicate who had the HSA account (check box).
Then enter the info from your 1099-SA. Box 3 should have Code 1 for a Normal Distribution.
Indicate Yes, for Medical Expenses.
After DONE, keep going.
Answer questions about HDHP coverage, and type of plan

The HSA is linked to the HDHP plan, so if you missed this portion, the distribution may show as taxable.

@Peckkd

Opus 17

Level 15

Keep going. Turbotax will assume the distributions are taxable until you get to the question about "did you use the distributions only for qualified medical expenses."

Also, in some cases Turbotax will tax your contributions until after you finish the entire interview and answer the questions that show you had qualifying insurance. So just keep going.

BillM223

Level 15

The IRS considers that distributions from your HSA are, by default, taxable. This is why your tax goes up and your refund is reduced when you enter the 1099-SA.

HOWEVER, when on the next screen you indicate that the distributions were all for qualified medical expenses, the distribution is removed from taxable income and your taxes go back down and your refund goes back up.

Things happen in the background in TurboTax that are not obvious to the user; that is why we urge you not to watch the refund meter too closely.

In rare cases if the user jumps off the 1099-SA entry screen or the next screen too quickly, the distribution can be stuck as taxable. To fix this, you will need to delete your 1099-SA and re-add it.

To do this:

*** Desktop***

1. go to View (at the top), choose Forms, and select the desired form. Note the Delete Form button at the bottom of the screen.

*** Online ***

1. go to Tax Tools (on the left), and navigate to Tools->Delete a form

2. delete form(s) 1099-SA (if one)

3. go back and re-add the 1099-SA

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LAURENTIU6

Level 2

My refund goes down after entering the amount, but does not go back up after I clicked that only medical expenses were used. I deleted the 1099-SA form, but the same thing happened after completing the 1099-SA again. What could be the problem please?