Hi TurboTax Support and Community,
I have a question about an odd situation that I have with a prior year HSA contribution that was in excess of that year's limit, and how I can get TurboTax Online to correctly recognize a distribution that I made to correct the excess contribution.
I inadvertently overcontributed to an HSA in 2021. It was an overcontribution because I changed employers during 2021 and ended up in a non-HDHP health plan for part of the year, so my limit for HSA contributions was lower for that year. I didn't know about this at the time and ended up contributing the full annual limit, and thus a part of it was an excess contribution ($900). I didn't have an HDHP for 2022 and 2023, but I thought I might end up with one, so I never took a distribution of the excess amount, and instead opted to pay the 6% tax on the excess contribution for those two years. In 2024, I finally had the $900 distributed so that I can just pay the 20% tax on that amount one-time and stop paying the 6% tax every year.
However, my HSA bank noted the $900 distribution on a second 2024 1099-SA as code 2 - excess contribution. I am wondering if this is incorrectly coded, because, when I enter this information into TurboTax Online for my 2024 return, it looks like TurboTax is not recognizing it as a taxable distribution. I am not getting the 20% tax ($180) and instead I am still seeing the 6% tax ($54) on my return. I believe the 6% tax should be removed and I should be just paying the 20% tax on the distribution.
How should I enter this information into TurboTax to get it to correctly recognize the $900 distribution as a taxable withdrawal, and thus pay the 20% tax instead of the 6% tax?
Thanks for your help!
