HSA Overcontribution Incorrect

Forum|Forum|4 years ago
April 11, 2022
5 replies
29 views

My wife and I both have HSA accounts through our employers. Mine is a single account and my wife's is a family account. We are both covered by HDHP health plans. The combined total of my, plus my employer's, contribution to my single HSA account was $2,725. My wife's total contribution to her family plan, including her employer's contribution, was $4,600. Those values are reflected in our W-2's and in the forms that TurboTax displays for entering the HSA information. We did not contribute anything additional, are not on Medicare, and did not use any funds for medical expenses. However, when the screen comes up for our over contribution, rather than stating $125, it states we over-contributed by $2,750. I have tried re-entering information and logging out and back on, but it keeps stating we over-contributed. Per the IRS rules for 2021, we were allowed, as a family, to contribute a total of $7,200 to our respective HSA's, regardless of how it was divided between the two of us.

RaifH

Level 10

Yes, you are correct, based on the information you provided, it looks like you have an over-contribution of $125 to your HSA. The discrepancy can either be due to an error in entering the contribution amounts, the coverages, or due to an over-contribution in a previous year. Let's check your HSA entries to make sure everything is correct:

Enter your W-2s with the Code W in Box 12.
This should have opened an area on your tax return for HSAs. If you do not see it, go to Federal > Wages & Income > Less Common Income > 1099-SA, HSA, MSA and click Start/Revisit.
Make sure you both have HSA selected.
If you made any withdrawals from your HSA, you should receive a 1099-SA and answer Yes to Did you use your HSA to pay for anything in 2021? Otherwise, select No.
Assuming you did not inherit this HSA, select No.
Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. If you made any additional out-of-pocket contributions, enter them here. Do not re-enter any paycheck deferrals that were contributed to your HSA with pre-tax dollars. Those are already accounted for on your W-2s.
If your employer made additional contributions not reported on your W-2, enter them on the next screen, Did your employer tell you about any other contributions? This is unusual.
Answer the questions on the next two screens, making sure you answer the question related to your HDHP correctly. For yourself, enter self-only coverage all year and family coverage all year for your spouse.
If you have over-funding from a prior year, this may have automatically carried over to this year. You can check your 2020 Form 5329, Line 47 to see if there is an excess contribution from last year.

VWH_PNWAuthor

Level 2

Yes, we followed steps 1-8 to get to this point. We did have an over contribution from last year, but we withdrew it prior to April 15, 2021. Yet there's no option to state that we corrected the over contribution from the prior year. I only see options stating:

We'll withdraw the full $2,750 excess contribution by April 18
We'll withdraw some of the excess contribution by April 18
No, we're not going to make this withdrawal

What's the impact if I check option 1, even though we withdrew our excess from last year, and just withdraw our $125 from this year?

RaifH

Level 10

Yes, that is fine for this year. If you withdrew the excess contribution from 2020 after January 1, 2021, you should have received a 1099-SA with a Code 2 that you need to report this year. Any earnings in Box 2 would be added to your taxable income. Make sure when you withdraw the $125 you tell the HSA provider it is for an excess contribution.

If your 2020 return is showing an over-contribution and you have not already amended it for the excess contributions withdrawn prior to the filing deadline of May 17, 2021, then you can amend your 2020 return to remove the 6% penalty on excess contribution of $2,625.