BillM223
Expert Alumni

Get your taxes done using TurboTax

"I had an HSA opened this year" which year are you talking about, 2019 or 2020? (this is a perpetual problem in the tax year...what is the meaning of "this" year, the current calendar year or the current tax year?)

 

First, were you covered by an HDHP policy in December 1, 2019, and your spouse not covered by the FSA at the same time (the FSA, of course, also covers you)?

 

If "yes" then you have the benefit of the last-month rule. This rule states that IF you had valid HDHP coverage on December 1st of the year (i.e., the last month), then you can use the full annual HSA contribution limit, no matter how many or few months you actually had coverage. The only catch is that you have to stay under HDHP coverage for the next year or be penalized.

 

It sounds like you indicated in the HSA interview that you had HDHP coverage on December 1st, so any HSA contribution that you had made was no valid, which would (likely) remove the excess contribution.

 

"A form 8889 was then generated and I was asked to edit it at the end of the tax return. Upon editing it as the software requested..."

 

Where was this, in the Federal Review? We really would prefer that you not edit the 8889 in the Review, except in certain unavoidable situations.

 

What was the exact message that you got in the Review?

 

Listen, you know that if you had HDHP coverage on December 1st and if spouse were not under the FSA at the same time, then your HSA contributions would be allowed.

 

But since you have evidently triggered excess contribution processing, we may have an issue with TurboTax remembering the amount of the excess that you agreed to withdraw (going through the interview again doesn't reset this to zero).

 

So if you think that you did qualify under the last-month rule, then please do the following to reset all your HSA data and start over again.

 

**

1. make a copy of your W-2(s) (if you don't have the paper copies)

2. delete your W-2(s) (use the garbage can icon next to the W-2(s) on the Income screen

 

*** Desktop***

3. 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 ***

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

 

4. delete form(s) 1099-SA (if one), 8889-T, and 8889-S (if one)

5. go back and re-add your W-2(s), preferably adding them manually

6. go back and redo the entire HSA interview.

**

 

The next thing is how to handle the the withdrawal of excess contributions that you probably didn't want to do. 

 

If you go through the steps above and re-enter your HSA data and find that you do not have any excess HSA contributions, then contact your HSA custodian and ask them to consider that withdrawal a "mistaken distribution". You will have to send them the money back, but that will stop your distribution from being declared as a non-qualified distribution subject to a 20% penalty.

 

Note that your custodian doesn't have to agree to this, so be very nice to them when you ask.

 

If I understand your situation, you will get back to where you wanted to be: valid HSA contributions, and tax benefits.

 

If you have any questions or if I misunderstood something, please come back and tell me.

 

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