Form 1099-R Smart Worksheet missing HSA funding distributions for Roth IRAs

[vegas_man]

TurboTax 2023 Home & Biz desktop user here.

The 1099-R Smart Worksheet is missing the entry for HSA funding distributions for Roth IRAs but it does have it for traditional IRAs. Per the IRS, you can rollover a Roth IRA the same as a traditional IRA to an HSA – and all the same rules apply.

It appears this is an oversight by TurboTax to not include HSA funding distributions for Roth IRAs in the 1099-R Smart Worksheet. This prevents the entry from populating on Line 10 of Form 8889, which must be reported to IRS for such rollovers.

Is there any chance this can be fixed prior to April 15th?

[BillM223]

No, this will not be "fixed", because Roth to HSA is listed as a non-supported feature. "4. Roth to Health Savings Account: The program does not support trustee-to-trustee transfers from a Roth IRA to a Health Savings Account."

A Roth IRA to an HSA is not nearly as elegant as a traditional IRA to an HSA, because in the example of a traditional IRA to an HSA, both sides are pretax, which is not the case with a Roth IRA, where the contributions may or may not be taxable and the earnings may or may not be taxable. Worse, you may have to worry about Basis in the Roth IRA, but not in the HSA.

This is not an "oversight" but a deliberate design choice. 

[vegas_man]

How was I supposed to know that before I purchased TurboTax?

So the choices are:

Don't use TurboTax to file my taxes.

Use the "override" feature of TurboTax to manually populate Form 8889, line 10.

Use TurboTax as-is to commit tax fraud and file incorrectly.

Hmm... which one should I choose?

[TerryTB]

Took a long time BUT we found where to enter IRA distribution for a one-time HSA Funding Contribution.  They really call it HSA Funding Distribution which seems odd.  Anyway, on Form 1099-R Distribution from Pensions, IRA, etc. go to the Insurance section.  The middle choice is Amount of health savings account (HSA) funding distributions to enter your number.

By doing this it is recorded as HFD on line 4B of the 1040.  HFD is an acronym for HSA Funding Distribution.

[dmertz]

@vegas_man ,  it almost never makes sense to do an HFD from a Roth IRA because, unless the HFD dips into your earnings that would be taxable if distributed to you, there is no reason to claim any part of the distribution as being an HFD.  If the Roth IRA distribution is otherwise nontaxable due to being a distribution of contribution basis or contribution basis that is not subject to any additional tax, simply report the HSA contribution as an ordinary personal HSA contribution and report the Roth IRA distribution as an ordinary Roth IRA distribution.