BillM223
Expert Alumni

Get your taxes done using TurboTax

First, the only thing that matters is the coverage you had on the first day of the month, no matter what you did later in the month.

 

So, when you made contributions to your HSA in 2023, you were entitled to use the full annual HSA contribution limit, even if a few days later, you changed coverage.

 

Since I don't know how much you contributed in 2023 nor what your HDHP coverage was in 2023, I can't tell you why you have a 5329. The 5329 reports penalties on a variety of things, not just on HSAs.

 

You used the "last-month" rule in 2023. This rules stipulates that whatever coverage you have on December 1, 202x, if the coverage for the whole year, without regard to how many months you actually had coverage.

 

If you don't recall choosing to use the "last-month" rule, it's because TurboTax does it for everyone automatically. The catch is that when you use the "last-month" rule, you have to maintain HDHP coverage for the next year. You obviously did not.

 

So TurboTax is going to ask a series of questions that most taxpayers never see, because it needs to calculate what your allowed contribution limit would have been if you had not used the "last-month" rule. For many taxpayers (and I suspect for you), the result will be no extra tax.

 

It is true that you should not be receiving credit for the contributions in 2024, but I don't know enough about your situation to know why you think you are getting credit in 2024.

 

To know better, tell me:

1. How much did you contribute (you and your employer anyone else) in 2024?

2. What type of HDHP coverage did you have on December 1, 2023?

3. Why do you think you are getting "credit" for your 2023 contributions in 2024?

4. Please do not remove any HSA stuff from your 2024 return until we understand your situation better.

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